The following table fives quantity supplied and quantity demanded at various prices in the perfectly competitive meat packing markets:
|
Prices (per lb.)
|
Qs
|
Qd (in millions of lbs.)
|
|
$1
|
10
|
100
|
|
$1.25
|
15
|
90
|
|
$1.50
|
25
|
75
|
|
$1.75
|
40
|
63
|
|
$2.00
|
55
|
55
|
|
$2.25
|
65
|
40
|
Assume that each firm in the meat-packing industry faces the following cost structure:
|
Pounds
|
TC
|
|
60,000
|
$110,000
|
|
61,000
|
$111,000
|
|
62,000
|
$112,000
|
|
63,000
|
$115,000
|
1. What is the profit maximizing output level for the typical firm? (Hint: Calculate MC for each change in output, then find the equilibrium price, and calculate MR for each change in output)
2. Is this market in long-run equilibrium? Why or why not? ( Hint: Calculate ATC)
3. What do you expect to happen to the number of meat packing firms over the long run? Why?