Long-Run Equilibrium Analysis in the Binder Industry
a) What is the short-run equilibrium price and output of binders?
b) What is the long-run, profit-maximizing level of output of the representative binder seller?
c) What is the long-run equilibrium price charged in the market for binders?
d) What is the long-run equilibrium output of the binder industry?
e) How many binder sellers will there be in the long-run equilibrium?
a) Short-Run Equilibrium Price and Output
b) Long-Run, Profit-Maximizing Level of Output
c) Long-Run Equilibrium Price
d) Long-Run Equilibrium Output
e) Number of Binder Sellers in Long-Run Equilibrium
For the short-run equilibrium price and output of binders, the price is $16.80 and the output is 2620 binders per month.
In the long run, the profit-maximizing level of output for the representative binder seller is 4 binders per month. This is achieved by producing where average total cost (ATC) is at a minimum.
The long-run equilibrium price charged in the market for binders is $16.80, which corresponds to the minimum ATC of firms in the industry.
The long-run equilibrium output of the binder industry is 4,460 binders per month, where firms meet the demand at the long-run price.
Approximately 1,115 binder sellers will be present in the long-run equilibrium, calculated by dividing the total quantity of output by the output per firm.