Question

Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In long-run equilibrium, the price per unit of cloth is . Describe the equilibrium using graphs for the entire market and for an individual producer. Now suppose that textile producers in other countries are willing to sell large quantities of cloth in the United States for only per unit.

Answer 1

Answer:

Since we are not given the equilibrium price or quantity, I drew a graph showing Pe and Qe as them.

If foreign firms start selling in the domestic market at a higher price, then the curve shouldn't modify, but if they start to sell at a lower price, the equilibrium price and quantity will shift to the left.

Pai = price after imports

Qai = quantity after imports

The second graph shows the equilibrium point for an individual firm.