8. Short-run and long-run effects of a shift in demand Suppose that the tofu industry is initially operating in long-run equilibrium at a price level of $5 per block of tofu and quantity of 175 million blocks per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in tofu are linked to chronic illness. The FDA's research is expected to cause consumers to demand Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the FDA's research. PRICE (Dollars per block) 10 9 8 2 1 0 0 35 70 Supply Demand tofu at every price. In the short run, firms will respond by 105 140 175 210 245 280 315 350 QUANTITY (Millions of blocks) Demand Supply ?

8. Short-run and long-run effects of a shift in demand Suppose that the tofu industry is initially operating in long-run equilibrium at a price level of $5 per block of tofu and quantity of 175 million blocks per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in tofu are linked to chronic illness. The FDA's research is expected to cause consumers to demand Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the FDA's research. PRICE (Dollars per block) 10 9 8 2 1 0 0 35 70 Supply Demand tofu at every price. In the short run, firms will respond by 105 140 175 210 245 280 315 350 QUANTITY (Millions of blocks) Demand Supply ?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section: Chapter Questions

Problem 11PA: Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2...

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Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 + q2 Marginal cost: MC = q where q is an individual firms quantity produced. The market demand curve for this product is Demand:QD = 120 P where P is the price and Q is the total quantity of the good. Currently, there are 9 firms in the market. a. What is each firms fixed cost? What is its variable cost? Give the equation for average total cost. b. Graph average-total-cost curve and the marginal-cost curve for q from 5 to 15. At what quantity is average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity? c Give the equation for each firms supply curve. d. Give the equation for the market supply curve for the short run in which the number of firms is fixed. e. What is the equilibrium price and quantity for this market in the short run? f. In this equilibrium, how much does each firm produce? Calculate each firms profit or loss. Is there incentive for firms to enter or exit? g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market? h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?
3. What is the meaning of ‘acceptable loss’ for a perfectly competitive firm ?Draw a graph and explain. 4. How can we increase the Total Revenue of products by using elasticity ?Explain them briefly.
26.A firm operates in a perfectly competitive market and is producing at the profit-maximizing output. It is incurring economic losses. Based on this information, which of the following is true? A-Average total cost = price; marginal cost > marginal revenue. B-Average total cost = price; marginal cost = marginal revenue C-Average total cost > price; marginal cost = marginal revenue D-Average total cost > price; marginal cost > marginal revenue E-Average total cost < price; marginal cost > marginal revenue 27.In the short run, a price-taking firm decides to produce zero units of output. Which of the following must have been the case? A-The market price was less than the firm's average variable cost. B-The firm was earning normal profits in the short run but projected economic losses in the long run. C-The firm's average total cost was higher than its average revenue. D-The market price was between the firm's average variable cost and average total cost. E-The…
9. Which of the following best explains why a price-taker firm faces a horizontal demand curve at the market equilibrium price and a price-searcher firm faces a downward-sloping demand curve? a. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it raises its price. b. A price-taker firm will lose all of its sales if it lowers its price below the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it lowers its price. c. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are differentiated from its competitors. A price-searcher firm produces a product that is identical to its…
2. Suppose General Electric, one of the largest suppliers of light bulbs, decides to discontinue its production of light bulbs. SELECTED THE CORRECT ANSWER a. Which of the following will occur in the market for light bulbs? -demand will increase -supply will decrease -demand will decrease -supply will increase b. Will General Electric's exit from the light bulb market result in a shortage or surplus of light bulbs at the previous price? Will the price of light bulbs _rise or fall? _shortage, fall _surplus, rise _shortage, rise _surplus, fall
23. Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. What will happen to demand—shift right, shift left, no shift? What will happen to profits for chocolate producers in the short run—increase, decrease, or no change? What will happen to the short-run supply curve—increase, decrease, or no change? What will happen to the long-run supply curve—increase, decrease, or no change?
7. Short-run supply and long-run equilibrium Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. The following diagram shows the market demand for copper. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. If there were 20 firms in this market, the short-run equilibrium price of copper would be ___ per…
4) Explain why a firm should continue to operate in the short run so long as market price is greater the firm's average variable cost at the profit-maximizing level of output.
4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 +1/2q^2Marginal cost: MC = q; where q is an individual firm’s quantity produced. The market demand curve for this product is Demand: Demand: QD = 120 − P, where P is the price and Q is the total quantity of the good in the market. Currently, there are 9firms in the market. In each following question, please explain how you find the answer!4.1 What is the equilibrium price and quantity for this market in the short run?
7. Short-run supply and long-run equilibrium Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. The following diagram shows the market demand for titanium. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. If there were 20 firms in this market, the short-run equilibrium price of titanium would…
1. The market for manicures and other nail treatments is very competitive. How would the following developments affect the number of nail treatments that a typical nail salon wants to supply in the short run? a. Heightened concern about their appearance causes people to want more manicures at a given price. b. The government requires all nail salons to pay a new yearly licensing fee to operate. c. Worse job prospects elsewhere in the economy cause more people to want to become manicurists, causing the wages of manicurists to fall.
3 The graph below shows the costs and revenue curves for Dollar-Daze, a typical profit-maximizing firm in a perfectly competitive market producing Good X. Answer the following questions based on the graph below d. As the market for Good X moves into the long-run equilibrium, explain what will happen to the price of Good X and why.e. Assume the cross-price elasticity of demand between Good X and Good B is positive, what will happen to the quantity demanded of Good B given the change in the long-run price of Good X in part (d)?