The market for apples is perfectly competitive and currently has 400 identical firms. Each firm has fixed costs of $16 and average variable costs given below: Quantity Average Variable Cost 1 $1 2 $2 3 $3 4 $4 5 $5 6 $6 7 $7 a) The equilibrium price is currently $11. How much does each firm produce in order to profit maximize and what is the total quantity supplied in the market? b) As the market transitions to long-run equilibrium, will the price of app;es fall or will it rise? Explain.

The market for apples is perfectly competitive and currently has 400 identical firms. Each firm has fixed costs of $16 and average variable costs given below: Quantity Average Variable Cost 1 $1 2 $2 3 $3 4 $4 5 $5 6 $6 7 $7 a) The equilibrium price is currently $11. How much does each firm produce in order to profit maximize and what is the total quantity supplied in the market? b) As the market transitions to long-run equilibrium, will the price of app;es fall or will it rise? Explain.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 10PA

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