Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE). Using our side-by-side graph, depict the market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any. Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting). assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves. market price is always greater than the minimum of the AVC curve.
Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE). Using our side-by-side graph, depict the market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any. Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting). assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves. market price is always greater than the minimum of the AVC curve.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE).
- Using our side-by-side graph, depict the
market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any. - Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting).
assume the natural gas industry is
market price is always greater than the minimum of the AVC curve.
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