3. The figure below shows the market for bread in the short-run and in the long-run. The horizontalaxis is the number of loaves and the vertical axis is the price and cost in Euros (€). All bakeries areidentical. Use the information given to determine whether each of the following statementsregarding the short-run equilibrium is true or false.Isoprofits and cost curves for eachbakeryMarket supply and demandIsoprofit curves4.5Original4.5MC curve4.0 Demandsupply4.03.53.5Newsupply3.03.02.52.52.02.0AC curve1.5Long runsupply1.5 ..1.01.00.50.5661005,000,6,6000.00.0O 40 80 120 160 200O 2,000 4,000 6,000 8,000 10,000(a) In the short-run equilibrium, 66 bakeries produce 100 loaves each.(b) In the short-run equilibrium, each bakery makes an economic rent of €0.50.(c) The short-run equilibrium is defined as the equilibrium where the number of bakeries isexogenous (fixed/taken as given).(d) At point A, the bakeries have an incentive to drop the price to capture more of themarket.

In long run firm always earn normal profit means total revenue is always equals to total cost. In…

3. The figure below shows the market for bread in the short-run and in the long-run. The horizontal axis is the number of loaves and the vertical axis is the price and cost in Euros (€). All bakeries are identical. Use the information given to determine whether each of the following statements regarding the short-run equilibrium is true or false. Isoprofits and cost curves for each bakery Market supply and demand 4.5 Isoprofit curves 4.5 MC curve Original supply 4.0 4.0 Demand 3.5 3.5 New 3.0 3.0 supply 2.5 2.5 2.0 2.0 AC curve .. Long run supply 1.5 .. 1.5 . 1... ...

3. The figure below shows the market for bread in the short-run and in the long-run. The horizontal axis is the number of loaves and the vertical axis is the price and cost in Euros (€). All bakeries are identical. Use the information given to determine whether each of the following statements regarding the short-run equilibrium is true or false. Isoprofits and cost curves for each bakery Market supply and demand 4.5 Isoprofit curves 4.5 MC curve Original supply 4.0 4.0 Demand 3.5 3.5 New 3.0 3.0 supply 2.5 2.5 2.0 2.0 AC curve .. Long run supply 1.5 .. 1.5 . 1... ...

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.6P

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