Question

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Table 1 below illustrates the competitive market demand and supply of bread. The units of bread are given in thousands. Table 1 : Market for Bread Price Quantity Quantity demanded (in 000s) supplied in 000) 120 0 2 100 20 3 80 40 4 60 60 5 40 80 6 20 100 7 0 120 1 Suppose they are 100 identical firms in the bread market. a) Determine the amount each firm will produce? (5 marks) b) Calculate the consumer surplus, producer surplus, and total surplus at market equilibrium. (15 marks) c) Suppose the market quantity is 40,000 units. Make sure to calculate the relevant values to describe the effect of the market activity on consumer welfare, producer welfare, and economic efficiency (20 marks) d) Suppose the firm's average total cost(ATC) at the quantity it produces as indicated in part (a) is $2. Use your knowledge of the perfect competition to calculate the profit/loss of the firm. (10 marks) e) Draw a suitable diagram to show the market equilibrium and the firm's equilibrium. (10 marks) 1) Explain the adjustment to the market and firm leading to the long-run equilibrium. (20 marks) g) Explain, what the firm has to do to make long-run positive economic profits. (20 marks) Table 1 below illustrates the competitive market demand and supply of bread. The units of bread are given in thousands. Table 1 : Market for Bread Price Quantity Quantity demanded (in 000s) supplied in 000) 120 0 2 100 20 3 80 40 4 60 60 5 40 80 6 20 100 7 0 120 1 Suppose they are 100 identical firms in the bread market. a) Determine the amount each firm will produce? (5 marks) b) Calculate the consumer surplus, producer surplus, and total surplus at market equilibrium. (15 marks) c) Suppose the market quantity is 40,000 units. Make sure to calculate the relevant values to describe the effect of the market activity on consumer welfare, producer welfare, and economic efficiency (20 marks) d) Suppose the firm's average total cost(ATC) at the quantity it produces as indicated in part (a) is $2. Use your knowledge of the perfect competition to calculate the profit/loss of the firm. (10 marks) e) Draw a suitable diagram to show the market equilibrium and the firm's equilibrium. (10 marks) 1) Explain the adjustment to the market and firm leading to the long-run equilibrium. (20 marks) g) Explain, what the firm has to do to make long-run positive economic profits. (20 marks)