Question

1. Draw two graphs of a theoretical situation of the vaccine market during these times of the pandemic of COVID-19.

Draw these two graphs, short and long term costs for the initial vaccine firm/firms.

Draw the graphs to show the firm's cost curves in the short-run, and the long-run (envelope) showing where these initial vaccine producers will operate (i.e. the efficient scale). Firm's cost curves will dictate supply of this firm/or firms.

Answer 1

Covi d 19 is such a pandemic .Major objective of most of countries are to introduced vaccine even some of them has tried thier in vaccine formation. Initially In the short run cost of introducing a new vaccine will be high as everything has to setup from beginning it might be lower down later stage as it cover its cost in the long run.

Firm's cost curve in the short run:

Total cost is the aggregate of total fixed cost and total variable cost .It will show downward slope in the beginning That is OM Point as its touches the minimum.point it start rising because in the short run only variable factor can increase like labour and machinery to increase the production where as fixed factor can not change therefore fixrd cost also does not change.thereafter.total cost and variable cost will start increasing at increasing rate .It is so because oflaw of diminishing returns.At this stage firm will suffers several diseconomies .cost of each additional unit is more than previous unit.In short,short run cost curves falls initiallg after touching minimum point it begin to rise

FIRM'S COST CURVE IN THE LONG RUN:

Long run cost curve is tangent to each short run average cost at some point .M is the minimum point of long run average cost curve in the long run both fixed cost and variable cost changed .

At point M  long run minimmum average cost and short run minimum average cost are equal to each other.long run average cost curve envelope all short run average cost curve.