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.

Answer 1

Answer:

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