Answer the Following

Essay

Answer the following:
a)Assume that the gold-mining industry is perfectly competitive.On the diagrams below,illustrate the long-run equilibrium in the overall gold market and for a representative gold mine.Draw the industry supply and demand curves as well as the firm's marginal cost curve.Indicate the equilibrium prices and quantities in both markets (at the industry-level and at the firm-level).
b)Assume an increase in the demand for jewelry causes a surge in the demand for gold.Using your diagrams,show what happens in the short-run to the gold market and to each existing gold mine.Specifically,are individual firms earning positive,negative,or zero economic profits? Indicate their profit on your graph.
c)If the demand for gold remains high,what would happen to the price over time? Specifically,would the new long-run equilibrium price be above,below,or equal to the short-run equilibrium price in part (b)? What causes this change in price,if any?
d)Would the new long-run equilibrium price be above,below,or equal to the original long-run equilibrium price? That is,as you've drawn it,is the long-run supply curve in the gold industry upward-sloping,horizontal,or downward-sloping? Explain why it would have this shape.