1.Explain how the long run differs from the short run in pure competition. 2. Explain how the entry and exit of firms affects resource flows and long-run profits and losses
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1.Explain how the long run differs from the short run in pure competition.
2. Explain how the entry and exit of firms affects resource flows and long-run
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- In the argument for why perfect competition is allocatively efficient, the price that people are willing to pay represents the gains to society and the marginal cost to the film represents the costs to society. Can you think of some social costs or issues that are not included in the marginal cost to the firm? Or some social gains that are not included in what people pay for a good?Assuming that the market for cigarettes is in perfect competition, what does allocative and productive efficiency imply in this case? What does it not imply?What are the four basic assumptions of perfect competition? Explain in words what they imply for a perfectly competitive firm.
- 4. Sketch the graph of the long run supply curve and discuss the process behind. How does this affect the marginal cost and the the equilibrium in perfect competition. Since the firms are price takers, is it possible for all to have the same marginal cost?1. Explain how the long run differs from the short run in pure competition. 2. The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods? Explain.1. A) What are the underlying assumptions associated with Perfect Competition? B) Explain why firms operating under Perfect Competition make normal economic profit in the long-run. C) Explain why Perfect Competition results in Allocative Efficiency. D)Explain why Perfect Competition results in Economic Efficiency.
- #4. Agriculture in india is mostly characterized by perfectly competitive market why? Short answer quickly2. "Assuming gator farming is perfectly compettive; explain the long-run competitive equilibrium condition for the typical gator farmer and the industry as a whole."1. Draw a graph representing a perfectly competitive firm earning an economic profit.(Make sure to show both the firm and the industry graphs)a. What happens over time, if many firms are earning economic profits?b. Is this good or bad for consumers? Explain.2. Now draw a firm operating under perfect competition that is losing money but shouldstill stay open in the short run. (Again, show both the firm and the industry graphs)a. What happens over-time, if many firms are suffering economic losses?b. Is this good or bad for consumers? Explain.
- a) How does imperfect competition differ from perfect competition? b) True or False and explain: If a firm in imperfect competition makes economic profit in the short run they can sustain it in the long run. c) True or False and explain: In imperfect competition all firms charge the same price.2- What is the general decision rule used by perfectly competitive firms to maximize profits? On a graph, indicate the long- and short-run supply curves of the firm. Explain clearly why there is a difference. Why would a firm stay open and take losses in the short-run?3 a) Start with a model of the situation before the crisis in Ukraine. Draw a model of a representative individual firm in the market for wheat, i.e. an Australian wheat farmer who is a price-taker in the global market for wheat, in long-run equilibrium. Comment on the assumed market structure. Show and explain the amount of wheat the farmer will produce to the market, and explain revenue, costs and profits.
