Question

Recently, the spot market price of U.S. hot rolled steel plummeted to $400 per ton. Just one year ago, this same ton of steel cost $700. According to Metals Monitor, the drop in price was due to falling oil prices, along with a rise in cheap imports and excess capacity. These dramatic market changes have greatly impacted the supply of raw steel.

Suppose that last year the supply for raw steel was Qsraw= 600 + 4P, but this year it has shifted to Qsraw = 4,200 + 4P.

Assuming the market for raw steel is competitive and that the current worldwide demand for steel is Qdraw = 9,000 – 8P, compute the equilibrium price and quantity for the steel market one year ago, and the equilibrium price–quantity combination for the current steel market.

Price one year ago: $ ______

Quantity one year ago: _______

Price for current market: $ ______

Quantity for current market: ______

Suppose the cost function of a representative steel producer is C(Q) = 1,200 + 15Q2.

How much raw steel does a representative firm produce when the market price is $700?________

How much raw steel does a representative firm produce when the market price is $400?________.

Answer 1

The computation of given question is shown below:-

Step-by-step explanation:

One year ago

Quantity supplied = 600 + 4P

Quantity demanded = 9,000 - 8P

600 + 4P = 9000 - 8P

Price one year ago = $700

Quantity one year ago = 3,400

Current market:-

Quantity supplied = 4200 + 4P

Quantity demanded = 9,000 - 8P

4,200 + 4P = 9,000 - 8P

Price for current market = $400

Quantity for current market = 5,800

C(Q) = 1,200 + 15Q2

A representative firm in a competitive market would produce steel where MC = P

MC = dC ÷ dQ = 30Q

The raw steel does a representative firm produce when the market price is $700

30Q = 700

Q = 23.33

The raw steel does a representative firm produce when the market price is $400

30Q = 400

Q = 13.33