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B) What will happen to the equilibrium price and quantity in the market in the short run if the demand for face-masks increases significantly as a result of the Corona-virus? Please illustrate and explain the effect of this event on the equilibrium price and quantity of face- màsks in the short run at the industry level. C) Illustrate what will happen in the short run to the typical firm in response to this event. (Remember that the typical fim was in long-run equilibrium before this event occurred.) Be sure that your diagram is carefully and fully labeled.

B) What will happen to the equilibrium price and quantity in the market in the short run if the demand for face-masks increases significantly as a result of the Corona-virus? Please illustrate and explain the effect of this event on the equilibrium price and quantity of face- màsks in the short run at the industry level. C) Illustrate what will happen in the short run to the typical firm in response to this event. (Remember that the typical fim was in long-run equilibrium before this event occurred.) Be sure that your diagram is carefully and fully labeled.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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How would I do these? B and c
**Section III: Long Question. Answer all parts of this question** 1. Consider the market for face-masks in Connecticut. Assume that this market is characterized by the following set of conditions: i) The industry operates under perfect competition, and is considered to be a constant-returns-to-scale industry. ii) Each firm that produces face-masks has a set of "typically" shaped cost curves. iii) The market demand for face-masks is downward sloping, and the short run market supply of face-masks is upward sloping, indicating that at higher prices more can be supplied. iv) All face-masks produced by each firm are identical. **a) Assume that initially the market is in long run equilibrium with Price Po and Qo. Illustrate** (Note: The image does not include the illustration part; please refer to your course materials for diagrams and graphs.)
Transcribed Image Text:**Section III: Long Question. Answer all parts of this question** 1. Consider the market for face-masks in Connecticut. Assume that this market is characterized by the following set of conditions: i) The industry operates under perfect competition, and is considered to be a constant-returns-to-scale industry. ii) Each firm that produces face-masks has a set of "typically" shaped cost curves. iii) The market demand for face-masks is downward sloping, and the short run market supply of face-masks is upward sloping, indicating that at higher prices more can be supplied. iv) All face-masks produced by each firm are identical. **a) Assume that initially the market is in long run equilibrium with Price Po and Qo. Illustrate** (Note: The image does not include the illustration part; please refer to your course materials for diagrams and graphs.)
### Supply and Demand Analysis: Face Masks during the Corona-virus Pandemic **Question B: Market Equilibrium** What will happen to the equilibrium price and quantity in the market in the short run if the demand for face masks increases significantly as a result of the Corona-virus? Please illustrate and explain the effect of this event on the equilibrium price and quantity of face masks in the short run at the industry level. **Response:** In the short run, a significant increase in demand for face masks will likely lead to higher equilibrium prices and quantities. This is because the demand curve shifts to the right, representing an increase in demand. In this scenario, prices rise due to higher demand, sparking increased production to meet the new demand levels. The market reaches a new equilibrium where both price and quantity produced are higher. **Question C: Impact on Firms** Illustrate what will happen in the short run to the typical firm in response to this event. (Remember that the typical firm was in long-run equilibrium before this event occurred.) Be sure that your diagram is carefully and fully labeled. **Response:** In the short run, a typical firm will experience increased demand, leading to higher prices and output. Since the firm was previously in long-run equilibrium, it was producing at minimum average cost. Now, with increased prices, the firm can produce more at a higher price, moving to a new point on its short-run supply curve. The firm will operate above its normal output level temporarily until the market adjusts or new firms enter the market, restoring long-term equilibrium.
Transcribed Image Text:### Supply and Demand Analysis: Face Masks during the Corona-virus Pandemic **Question B: Market Equilibrium** What will happen to the equilibrium price and quantity in the market in the short run if the demand for face masks increases significantly as a result of the Corona-virus? Please illustrate and explain the effect of this event on the equilibrium price and quantity of face masks in the short run at the industry level. **Response:** In the short run, a significant increase in demand for face masks will likely lead to higher equilibrium prices and quantities. This is because the demand curve shifts to the right, representing an increase in demand. In this scenario, prices rise due to higher demand, sparking increased production to meet the new demand levels. The market reaches a new equilibrium where both price and quantity produced are higher. **Question C: Impact on Firms** Illustrate what will happen in the short run to the typical firm in response to this event. (Remember that the typical firm was in long-run equilibrium before this event occurred.) Be sure that your diagram is carefully and fully labeled. **Response:** In the short run, a typical firm will experience increased demand, leading to higher prices and output. Since the firm was previously in long-run equilibrium, it was producing at minimum average cost. Now, with increased prices, the firm can produce more at a higher price, moving to a new point on its short-run supply curve. The firm will operate above its normal output level temporarily until the market adjusts or new firms enter the market, restoring long-term equilibrium.
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