Suppose that the U.S. textile industry is competitive and there is no internatio

Question

Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In long run equilibrium, the price per unit of cloth is $30.
a. Describe the equilibrium using graphs for the entire market and for an individual producer.

b. Assuming that U.S. textile producers have large fixed costs, what is the short-run effect of these imports n the quantity produce by an individual producer? What is the short-rub effect on profits? Illustrate you answer with a graph.

c. What is the long-run effect on the number of U.S. firms in the industry?

Explanation / Answer

For entire market the graph will be simple like 'x' of demand & supply, Price is $30 at the intersection of the course.

For an individual producer, equilibrium is at the meeting point of marginal cost and marginal revenue. (I can't upload the graph)

As U.S textile producer have high fixed cost so the short run effect will be decrease in profits or no profits.

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