Economics.
Use The textbook we use is John B.Taylor’s “Principles of Microeconomics.” You may use We are supposed to describle and analyze a economics model. We need THREE SETS of diagrams, which means 6 diagrams in total. The two diagrams for each set are:a.a Supply and Demand diagram of market under pure competition;b. show how Demand looks to the individual firm.
1.Choose an industry which you see as meeting or approximating the conditions of pure competition. Discuss each of the assumptions of pure competition and state how closely you see this industry fitting those assumptions. Use the product/service which you have chosen to properly label the axes of your diagrams.
2.In a first set of diagrams draw the market (left side) in equilibrium and the firm (right side) breaking even. This is to be shown in two diagrams drawn horizontally side-by-side.
3.Beneath the first set of diagrams describe how the market would find the equilibrium price and what it means for the firm to “breakeven”. Explain why you have chosen to draw the market demand as relatively elastic or relatively inelastic.
4.In a second set of diagram shouw the short-run effects of a decrease in the marginal cost of production on the market and the firm. Shade in any profit or loss area the firm is experiencing. Beneath the second set of diagrams describe how the firms would choose the rate of output to produce in the short run.
5.Draw a third set of diagrams to show the long run effects of the decrease in the marginal costs of production on the market and a representative firm. Beneath the third set of diagrams describe how the firms would respond in the long run and how that would affect the market. Assume there are no external economics or diseconomies of scale.
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