Public Industry in Toronto (Hard)
Assume that the pub industry in Toronto is a constant cost, perfectly competitive industry. The
industry is currently in long-run equilibrium. The output of this industry can be expressed in
pints of beer sold.
a) In a diagram, draw the market demand (D), short-run supply (SRS), long-run supply (LRS)
curves, the representative firm’s short-run average cost (SRAC) and marginal cost
(SRMC) curves, and the representative firm’s long-run average cost curve. Show the
industry’s equilibrium price (P1) and equilibrium quantity (Q1), and the representative
pub’s equilibrium quantity (q1). Carefully label all your curves.