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Q. Market Structure Problem: The Widget Industry:
The Widget industry is perfectly competitive. The lowest point on the long-run average cost curve of each of the identical widget producers is $4 and this minimum point occurs at an output of 1,000 widgets per month. When the optimal scale of a firm's plant is operated to produce 1,150 widgets per month, the short-run average cost of each firm is $5. The market demand curve for widgets is:
Qd= 140,000 -10,000P where Qd is the quantity of widgets demanded per month and P is the price of a widget.
The market supply curve is:
Qs= 80,000 + 5,000P, where Qs is the quantity of widgets supplied per month and P is the price of a widget.
If the market demand curve shifts to:
Qd= 150,000 -5,000P
What is the new equilibrium price and output in the short run for both the industry and each firm?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M9722330

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