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The market for apple pies in the city of Ectenia is competitive and has the following demand schedule

The market for apple pies in the city of Ectenia is competitive and has the following demand schedule:
Price Quantity Demanded
$1………….. 1,200 pies
2………….. 1,100
3………….. 1,000
4…………… 900
5………….. 800
6………….. 700
7………….. 600
8…………… 500
9…………… 400
10………….. 300
11………….. 200
12…………… 100
13………….. 0

 

Each producer in the market has fixed costs of $9 and the following marginal cost:

Quantity Marginal Cost
1 pie……. $ 2
2………. 4
3………. 6
4……… 8
5……… 10
6……… 12
a. Compute each producer’s total cost and average total cost for 1 to 6 pies.
b. The price of a pie is now $11. How many pies are sold? How many pies does each producer make? How many producers are there? How much profit does each producer earn?
c. Is the situation described in part (b) a long-run equilibrium? Why or why not?
d. Suppose that in the long run there is free entry and exit. How much profit does each producer earn in the long-run equilibrium? What is the market price and number of pies each producer makes? How many pies are sold? How many pie producers are operating?

 

The market for apple pies in the city of Ectenia

May 16 2020 View more View Less

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