Explain what happens in the short-run to the gold market

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Assume that the gold-mining industry is perfectly competitive. Using a graph of the Representative Firm and a corresponding graph of the Market, illustrate a representative gold mine earning normal economics profits and illustrate equilibrium in the overall gold market. Indicate the equilibrium prices and quantities in both graphs. Now assume an increase in the demand for jewelry causes a surge in the demand for gold. Using your diagrams, show what happens in the short-run to the gold market and to the representative gold mine. Label your graphs so I can tell what happens in sequence. Explain. Specifically, are individual firms earning positive, negative, or zero economics profits? Indicate your answer on your graph. In word, explain what happens in the long-run. Why?

Reference no: EM13219123

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