**Text from Educational Content:**Suppose a $2 tax imposed on consumers causes the demand curve to shift down to $D_2$. At the new equilibrium price (shown by the intersection of $D_2$ and Supply), each firm would earn ______ profit in the long run. If this is a constant-cost industry, firms will ______ the industry when moving from the short run to the long run until the equilibrium market price is $_______ per cat toy.True or False: Because this is a constant-cost industry, the incidence of this tax falls equally on consumers and producers in the long run.- O True- O False ### 9. Moving from Short-Run to Long-Run EquilibriumIn the short-run equilibrium of the competitive market for cat toys, we observe distinct demand and supply dynamics. Below is a detailed breakdown of two critical graphs illustrating these concepts.#### Graph 1: Short-Run Market- **Axes:** - Vertical Axis: Price (Dollars per cat toy) - Horizontal Axis: Quantity (Thousands of cat toys per year)- **Curves:** - **Demand Curve ($D_1$):** This blue line represents the initial demand in the market. It slopes downward from left to right, indicating the typical inverse relationship between price and quantity demanded. - **Supply Curve:** This orange line slopes upward, reflecting the direct relationship between price and quantity supplied in the short run. - **Intersection:** The demand and supply curves intersect, determining the short-run equilibrium price and quantity in the market.#### Graph 2: Individual Firm in the Long Run- **Axes:** - Vertical Axis: Cost (Dollars per cat toy) - Horizontal Axis: Output (Hundreds of cat toys per year)- **Curves:** - **Marginal Cost (MC):** This orange U-shaped curve represents the cost incurred by producing one more unit of the product. Initially, it decreases due to economies of scale but eventually rises as diseconomies of scale set in. - **Average Cost (AC):** The green U-shaped curve shows the average cost per unit. It initially falls with increased output but rises after reaching the minimum point, aligning with the MC curve at its lowest point.This analysis highlights how firms achieve efficiency in the long run, adjusting production to minimize costs and meet equilibrium demands.

The competitive market for the toys was in a short run equilibrium at a price $5 and a quantity of…

Suppose a $2 tax imposed on consumers causes the demand curve to shift down to D₂. At the new equilibrium price (shown by the intersection of Da and Supply), each firm would earn profit in the long run. If this is a constant-cost industry, firms will the industry when moving from the short run to the long run until the equilibrium market price is 5 per cat toy. True or False: Because this is a constant-cost industry, the incidence of this tax falls equally on consumers and producers in the long run. True False

Suppose a $2 tax imposed on consumers causes the demand curve to shift down to D₂. At the new equilibrium price (shown by the intersection of Da and Supply), each firm would earn profit in the long run. If this is a constant-cost industry, firms will the industry when moving from the short run to the long run until the equilibrium market price is 5 per cat toy. True or False: Because this is a constant-cost industry, the incidence of this tax falls equally on consumers and producers in the long run. True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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