(g) Now assume that the market in which Dave's General Store operates is in long-run equilibrium. (i) Suppose the rent paid by Dave's General Store decreases. Will Dave's General Store's profit- maximizing quantity of Good X increase, decrease, or stay the same in the short run? Explain. (ii) Instead suppose Dave's General Store hires labor in a perfectly competitive market and the market wage increases. Will Dave's General Store's profit-maximizing quantity of Good X increase, decrease, or stay the same in the short run? Explain.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter11: Price And Output Determination: Monopoly And Dominant Firms
Section: Chapter Questions
Problem 6E
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Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly
labeled diagram must have all axes and curves clearly labeled and must show directional changes.
If the question prompts you to "Calculate," you must show how you arrived at your final answer.
The table below shows the total costs faced by Dave's General Store for different quantities of Good
X sold.
Quantity
0
1
2
3
4
5
6
7
8
9
10
Total Cost
$100
$110
$140
$190
$290
$440
$640
$900
$1,230
$1,640
$2,140
Dave's General Store sells Good X in a perfectly competitive market with a downward-sloping
demand curve and an upward-sloping supply curve. The market price is $120 per unit.
Transcribed Image Text:Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. The table below shows the total costs faced by Dave's General Store for different quantities of Good X sold. Quantity 0 1 2 3 4 5 6 7 8 9 10 Total Cost $100 $110 $140 $190 $290 $440 $640 $900 $1,230 $1,640 $2,140 Dave's General Store sells Good X in a perfectly competitive market with a downward-sloping demand curve and an upward-sloping supply curve. The market price is $120 per unit.
(g) Now assume that the market in which Dave's General Store operates is in long-run equilibrium.
(i) Suppose the rent paid by Dave's General Store decreases. Will Dave's General Store's profit-
maximizing quantity of Good X increase, decrease, or stay the same in the short run? Explain.
(ii) Instead suppose Dave's General Store hires labor in a perfectly competitive market and the market
wage increases. Will Dave's General Store's profit-maximizing quantity of Good X increase, decrease,
or stay the same in the short run? Explain.
Transcribed Image Text:(g) Now assume that the market in which Dave's General Store operates is in long-run equilibrium. (i) Suppose the rent paid by Dave's General Store decreases. Will Dave's General Store's profit- maximizing quantity of Good X increase, decrease, or stay the same in the short run? Explain. (ii) Instead suppose Dave's General Store hires labor in a perfectly competitive market and the market wage increases. Will Dave's General Store's profit-maximizing quantity of Good X increase, decrease, or stay the same in the short run? Explain.
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