If in the long run, the market demand for paper remains the same as in Problem 8,

a. What is the long-run equilibrium price of paper, the market output, and the economic profit or loss of each firm?

b. Does this market experience external economies, external diseconomies, or constant cost? Illustrate by drawing the long-run supply curve.

Problem 8

In Problem 7, as more and more computer users read documents online rather than print them, the market demand for paper decreases and in the short run the demand schedule becomes

If each firm producing paper has the costs set out in Problem 7, what is the market price and the economic profit or loss of each firm in the short run?

Problem 7

The market for paper is perfectly competitive and there are 1,000 firms that produce paper.
The table sets out the market demand schedule for paper.

Each producer of paper has the following costs when it uses its least-cost plant:

Transcribed Image Text:

Price (dollars per box) 2.95 4.13 5.30 6.48 7.65 8.83 10.00 11.18 Quantity demanded (thousands of boxes per week) 500 450 400 350 300 250 200 150