Marty's Seafood Company sells fish in a perfectly competitive ...

[ss2343]

Marty's Seafood Company sells fish in a perfectly competitive market. The market price is currently 3 per pound. At its current level of production, long-run average cost at Marty's Seafood Company is 2.75 per pound.
 
  If Marty's Seafood Company is representative of firms in the industry, is this industry in equilibrium? Explain.

Question 2

If an indifference curve were concave instead of convex to the origin, what implication would that have if the consumer reduces consumption of one good but still wants to enjoy the same level of utility in a two-good world?
 
  What will be an ideal response?

[Bsand8]

Answer to Question 1

No, the industry is not in equilibrium. In long-run equilibrium, price is equal to short-run marginal cost, short-run average cost, and long-run average cost. Firms in this industry are earning positive profits and new firms can be expected to enter the industry. This will lower the price of fish driving profit to zero.

Answer to Question 2

Essentially it would mean that the consumer would not need as much of the second good to compensate him for his reduction in the consumption of the first good.