Suppose that the monthly market demand schedule for Frisbees is

Suppose further that the marginal and average costs of Frisbee production for every competitive firm are

Finally, assume that the equilibrium market price is $6 per Frisbee. LO5
(a) Draw the cost curves of the typical firm.
(b) Draw the market demand curve and identify market equilibrium.
(c) How many Frisbees are being sold in equilibrium?
(d) How many (identical) firms are initially producing Frisbees?
(e) How much profit is the typical firm making?
(f) In view of the profits being made, more firms will want to get into Frisbee production. In the long run, these new firms will shift the market supply curve to the right and push the price down to minimum average total cost, thereby eliminating profits. At what equilibrium price are all profits eliminated?
(g) How many firms will be producing Frisbees at this price?

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Price |Quantity demanded $7 2,000 $5 $4 $3 32,000 $6 4,000 8,000 $1 150,000 1,000 16,000 64,000 Rate of output Marginal cost Average total cost 200 400 100 300 500 600 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50