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What is the equilibrium in the intermediate run

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(a) In the analysis of the example in section 8.3, we worked through the long-run equilibrium supply curve of pfillip for the case where the price of kapitose depends on kapitose demand by pfillip consumers: The price q of kapitose is K/200, where K is pfillip industry demand for kapitose as a factor of production. Suppose demand for pfillip is given by D(p) = 400 - lOOp. What is the long-run equilibrium? (This should be very easy.)

(b) Suppose demand for pfillip is given by D(p) = 750 - 150p. What is the long-run equilibrium? (You will probably need to resort to numerical calculations, both here and throughout the rest of the problem.)

(c) Suppose demand for kapitose begins at D(p) = 400 - lOOp, and the long-run equilibrium you computed in (a) is reached. Then, suddenly, demand for pfillip changes to D(p) = 750 - lSOp. What is the new short­ run equilibrium, where in the short run firms cannot enter; or leave the industry and cannot change their levels of kapitose utilization. (Once again, this is very easy, given what is in the text.)

(d) Continuing from (c), what is the equilibrium in the intermediate run, where in the intermediate run firms cannot enter or leave the industry but can change their levels of kapitose and legume utilization.

Reference no: EM13871317

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