Question

Use the orange points (square symbol) to plot the short-run industry supply curve for the wheat industry. Specifically, place an orange point at the lowest point of the supply curve and another orange point at the highest point of the supply curve. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output, since this is the industry supply curve. Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.)

Answer 1

Answer:

Explanation:

Suppose there is one perfect competitive market for wheat There are 90 firms in that industry.

Consider the Table 1 given below:

Table 1: Industry supply

MC      individual Quantity (9)     Industry quantity (Q)

25                 30                                30*90=2,700

40                 35                                35*90=3,150

55                 40                                40*90=3,600

70                 45                                45*90=4,050

Take possible MC (Marginal cost) with their respective individual. Calculate the industry supply by multiplying 90 with the firm's individual quantities as shown in Table 1 above.

Going by the graphical diagram in the attached image below, we can derive that:

The orange line represents the industry supply. The lower and higher orange represents the lowest and highest quantity respectively.

The intersection industry demand and industry supply gives the short run price and quantity

Therefor, the short run price and quantity are $40 and $3,150 respectively. This and can be shown with dotted black line.

So Therefore

At the current short run market price, the firms will produce in short run because this price is above the average variable cost

In the long, some firms will exit the market, given the current market price.