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15 December, 13:46

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.

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  1. 15 December, 16:11
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    Part 1: How much raw steel does a representative firm produce when the market price is $700?

    30Q = 700

    Q = 23.33

    Part 2: How much raw steel does a representative firm produce when the market price is $400?

    30Q = 400

    Q = 13.33

    Explanation:

    One year ago:

    Qs = 600 + 4P; Qd = 9000 - 8P

    600 + 4P = 9000 - 8P

    Price one year ago: $ 700 'Quantity one year ago: 3400

    Current market: Qs = 4200 + 4P; Qd = 9000 - 8P

    4200 + 4P = 9000 - 8P

    Price for current market: $ 400

    Quantity for current market: 5800

    C (Q) = 1,200 + 15Q2

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

    MC = dC/dQ = 30Q

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

    30Q = 700

    Q = 23.33

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

    30Q = 400

    Q = 13.33
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