The market for apple pies in the city of Ectenia iscompetitive and has the following demand schedule:Price Quantity Demanded$1 1,200 pies2 1,1003 1,0004 9005 8006 7007 6008 5009 40010 30011 20012 10013 0Each producer in the market has fixed costs of $9 andthe following marginal cost schedule:Quantity Marginal Cost1 pie $ 22 43 64 85 106 12a. Compute each producer’s total cost andaverage total cost for each quantity from 1 to6 pies.b. The price of a pie is now $11. How many pies aresold? How many pies does each producer make?How many producers are there? How much profitdoes each producer earn?c. Is the situation described in part (b) a long-runequilibrium? Why or why not?d. Suppose that in the long run there is free entryand exit. How much profit does each producerearn in the long-run equilibrium? What isthe market price? How many pies does eachproducer make? How many pies are sold inthe market? How many pie producers areoperating?
The market for apple pies in the city of Ectenia is
competitive and has the following demand schedule:
$1 1,200 pies
2 1,100
3 1,000
4 900
5 800
6 700
7 600
8 500
9 400
10 300
11 200
12 100
13 0
Each producer in the market has fixed costs of $9 and
the following marginal cost schedule:
Quantity Marginal Cost
1 pie $ 2
2 4
3 6
4 8
5 10
6 12
a. Compute each producer’s total cost and
average total cost for each quantity from 1 to
6 pies.
b. The price of a pie is now $11. How many pies are
sold? How many pies does each producer make?
How many producers are there? How much profit
does each producer earn?
c. Is the situation described in part (b) a long-run
equilibrium? Why or why not?
d. Suppose that in the long run there is free entry
and exit. How much profit does each producer
earn in the long-run equilibrium? What is
the market price? How many pies does each
producer make? How many pies are sold in
the market? How many pie producers are
operating?
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