The following graph shows the market demand for wheat. Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the lowest point of the supply curve and another orange point at the highest point of the supply curve. (Note: You can disregard the portion of the supply curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. (Note: Dashed drop lines will automatically extend to both axes.) 100 Demand 90 Supply Curve 80 70 60 Equilibrium 50 40 30 20 10 650 1300 1950 2600 3250 3900 4550 5200 5850 6500 QUANTITY OF OUTPUT (Thousands of bushels) At the current short-run market price, firms will in the short run. In the long run, the market given the current market price. PRICE (C ents per bushel)
The following graph shows the market demand for wheat. Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the lowest point of the supply curve and another orange point at the highest point of the supply curve. (Note: You can disregard the portion of the supply curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. (Note: Dashed drop lines will automatically extend to both axes.) 100 Demand 90 Supply Curve 80 70 60 Equilibrium 50 40 30 20 10 650 1300 1950 2600 3250 3900 4550 5200 5850 6500 QUANTITY OF OUTPUT (Thousands of bushels) At the current short-run market price, firms will in the short run. In the long run, the market given the current market price. PRICE (C ents per bushel)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the market demand for wheat.
Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the lowest point of the supply curve and another orange point at the highest point of the supply curve. (*Note*: You can disregard the portion of the supply curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Then, place the black point (plus symbol) on the graph to indicate the short-run equilibrium price and quantity in this market. (*Note*: Dashed drop lines will automatically extend to both axes.)
**Graph Explanation:**
- The graph shows a downward-sloping demand curve labeled "Demand" which illustrates the relationship between the quantity of wheat (in thousands of bushels) and the price (in cents per bushel).
- The x-axis represents the quantity of output ranging from 0 to 6500 thousand bushels.
- The y-axis represents the price ranging from 0 to 100 cents per bushel.
The graph requires the addition of:
- The short-run industry supply curve using orange points, which will be plotted from the lowest to the highest point of existing supply.
- An equilibrium point using a black plus symbol, which denotes the market equilibrium where supply meets demand.
**Questions:**
1. At the current short-run market price, firms will __________ in the short run.
2. In the long run, __________ the market given the current market price.
These questions require the reader to analyze the plotted supply and demand curves and determine likely firm behaviors in the short and long run.
Transcribed Image Text:**Understanding Cost Curves in a Perfectly Competitive Wheat Market**
In a perfectly competitive market for wheat in New York City, there are 130 firms. Each firm has the cost curves depicted in the accompanying graph.
### Graph Explanation:
- **Axes:**
- The horizontal axis represents the "Quantity of Output" measured in thousands of bushels.
- The vertical axis represents the "Cost" in cents per bushel.
- **Curves:**
- **MC (Marginal Cost):** This curve is upward sloping, reflecting the increase in cost as additional units are produced. It intersects the AVC and ATC curves at their minimum points.
- **ATC (Average Total Cost):** This curve is U-shaped, indicating that initially, average costs decrease with more production, but beyond a certain point, they start increasing.
- **AVC (Average Variable Cost):** This curve is also U-shaped, lying below the ATC curve, and follows a similar pattern but at a lower cost level due to fixed costs not being included.
Understanding these cost curves is crucial for analyzing firm behavior and market dynamics in a competitive industry.
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