6.The market for fertilizer is perfectly competitive market I currently producing output, but are currently making economic losses.a. How does the price of fertilizer compare to the average total cost, the average variablecost and the marginal cost of producing fertilizer?b. Draw two graphs, side by side, illustrating the present situation of the typical firm and in the market?c. Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied to the market? Answer:
1 . 7.Suppose there are 1,000 hot pretzel stands operating in New York City. Each stand has the usual U-shaped average-total-cost curve. The market demand curve for pretzels slope downward, and the market for pretzel is in long-run competitive equilibrium. a.Draw the current equilibrium, using graphs for entire market and for an individual pretzel stand.b.The city decides to restrict the number of pretzel-stand to only 800. What effect will this action have on the market and on an individual stand that is still operating? Draw graphs to illustrate your answer. Answer: .
Figure 9 2 .
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- Fall '07
- Economics, producer, AFC