Question

1. Suppose daily market demand is illustrated in the table below. Let there be 99 other firms just like yours, for a total of 100 firms in the market, in the short run. Fill in the table below, assuming there are 100 firms and that you each produce the profit-maximizing quantity at each price.

Price	Supply	Demand
0	0	1,600
20	300	1,500
40	560	1,400
60	780	1,300
80	960	1,200
100	1100	1,100
120	1200	1,000
140	1260	900
160	1280	800
180	1260	700
200	1200	600

2. What is the short-run market price? $100.
3. At the market equilibrium price, how many flu vaccinations should your company supply per day in the short run? Since there are 100 markets, output would be 1100 units.
4. At that price, what are your short-run economic profits?
5. Would there be any reason for you to shut down in the short run?
6. What do you expect to happen to the number of other firms in this industry in the long run?
7. In the long run, characterize your economic profits.

I just need D through G.. Thank you

Answer 1

Short-run is the period in which the supply of goods can be adjusted to the demand to some extent, because, some factors remain fixed, whereas other factors can be changed.

d. At equilibrium point, the firm is earning zero economic profits meaning thereby, that the firm is able to recover its average variable cost (AVC). The shut down point is that point at which it is equal to the minimum average variable cost. As long as the firm is recovering its average variable cost, the production will continue and the firm would not shut down. Even if it is decided to shut down the firm it firm has to incur some fixed cost on account of bank interest, insurance, depreciation, etc. However, if the firm is unable to recover its average variable cost in the short run, it will be decided to stop the production and the firm will be shut down.

e. Long-run is quite a long time period in which firms can change the supply of goods by changing all the factors of production. In the long-run, firms in equilibrium earn normal profits. The firms in the industry who had been able to recover its average variable cost in the short-run would continue production and earn normal profits in the long -run. However, the firms which suffered the losses of the average variable cost would have left the industry.

If the firms happen to earn super normal profits in the long-run, the existing firms will increase their production. Lured by super normal profits some new firms will enter into the industry. The total supply of the product will increase and their price falls down. Thus, due to a fall in price, the firms will get normal profits.

f. In the long-run, economic profit is the difference between price and minimum average total cost. The economic profit, in the long run, must be zero also called normal profit. If the firms are earning super normal profits in the long -run, the existing firms will increase the production and new firms will enter the market as a result total supply will increase and the price will fall. Ultimately, a price equal to the average cost will be charged in the market in the long-run. Hence, the firms will earn economic profits that is, normal profits in the long-run

In the long-run, MR = LMC = LAC = AR = Price