Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE). Using our side-by-side graph, depict the market equilibrium P 0 and Q 0 ,...

Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE).

• Using our side-by-side graph, depict the market equilibrium
  
  P₀
  and
  Q₀
  
  , the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as
  q₀
  
  ), and the individual firm’s profit if any.


• Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting).

assume the natural gas industry isperfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shapedATC andAVCcurves.

market price isalwaysgreater than the minimum of theAVCcurve.