If a firm in a perfectly competitive industry raises its price above market price. O a sales will drop to zero. Ob demand curves will become downward sloping. Oc profit will increase. O d. total revenue for the firm will increase. If there is a decrease in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning profits will see its profits O a. increase. O b. impossible to determine. Oc. not change. O d. decrease.

If a firm in a perfectly competitive industry raises its price above market price. O a sales will drop to zero. Ob demand curves will become downward sloping. Oc profit will increase. O d. total revenue for the firm will increase. If there is a decrease in industry supply while the industry demand curve remains the same, then an individual firm in a perfectly competitive industry currently earning profits will see its profits O a. increase. O b. impossible to determine. Oc. not change. O d. decrease.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 1SCQ: Firms ill a perfectly competitive market are said to be price takers that is, once the market...

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Quantity Price 0 20 1 18 2 16 3 14 4 12 5 10 Are the price and quantity combinations above for a perfectly competitive industry? Select one: O a. No, they are not because the demand curve should be perfectly elastic. O b. No, because the quantities are too low. O c. Yes, they are because the demand curve is downward sloping. O d. Yes, they are because the price falls the same amount for each increase in quantity. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Suppose that bicycles are produced by a perfectly competitive, constant-cost industryWhich of the following will have a larger effect the long-run price of bicycles: a government program to advertise the health benefits of bicyclingor (2) a government program increases the demand for steel, an input in the manufacture of bicycles that is produced in an increasing cost industry ? O. Option 1: shifts the demand curve out and increases the price. O. Option 2: shifts the supply curve up and increases the price O. Option 2: it shifts the demand curve up and increases the quantity. O. Option 2: shifts the supply curve up and increases the quantity.
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?
Economic profits may result from: O a. innovation b.risk taking Oc. exploiting market inefficiencies Od. all the above O e. a and b
4 The market for Blu-ray movies is perfectly competitive, with the market supply curve given by O = 15P and the market demand curve given by Q = 400 - 10P. The resulting market equilibrium is P* = 16, Q*=240. (a) Calculate the price elasticity of demand at the market equilibrium. Is demand elastic or inelastic at this point, and what does this mean? (b) Suppose that supply increases so that producers are willing to sell 10 more Blu-rays at any price, and at the same time demand decreases so that consumers are willing to purchase 40 fewer Blu-rays at any price. Find the new equilibrium price and quantity.
The production of plastic bags characterized by high fixed costs and low marginal costs. As a result, we would expect (relatively) O Few small firms in this market O Many large firms in this market O Many small firms in this market O Few large firms in this market
21. A long-run equilibrium in an industry exists when cost per unit is at its lowest possible level. O. there is only one firm in the industry. O. the size of the market remains constant. O. price equals cost per unit. O. price equals marginal cost. 22. A tariff imposed on a country as a penalty for dumping goods is called a(n) O. antidumping duty. O. quota tariff. O. ad valorem tariff. O. revenue tariff. O. dumping duty.
Answer the following: 1. Assuming that the product’s price is P58 per pack, should the competitor sell in the short-runWhy or why not?If it decides to sell, what will be the profit-maximizing (or loss-minimizing output per day)?What is the profit (or loss) that the seller can realize per day? What is the profit (or loss) per pack?A. Assuming that the product price is P42 per pack, answer the same questions in letter A.B. Because of increasing sellers of masks in the market, the product’s price further decreased to P32per pack. Again, answer the same questions in letter A.C. When is this seller going to shut down?D. Now generate the seller’s supply curve of mask in the short run.
a) Find the long run equilibrium price. Find the minimum efficient scale of the typical firm. Find the typical firm’s average cost when it operates at minimum efficient scale. In the long run, what price will prevail in this market? In words, clearly justify your answer. Suppose demand is QD = 3,200 – 100P. (b) Explain why you expect the number of firms in this market to be fifty-five. In this market, what is the short run supply function of the typical firm? What is the short run market supply function? Suppose the local government introduced a $90 licensing fee that raised the fixed cost from $160 to $250. c) Would the introduction of the licensing fee affect the short run equilibrium price or quantity? Justify your answer? Clearly explain why you expect that in the long run fewer larger firms will operate in this market. After the introduction of the licensing fee, what is the new long run equilibrium price? How many firms will survive in this market?
a. Are the following statements true or false? Explain your reasons. For a firm with price in excess of average total cost, the presence of economic profits implies that the firm should increase output in the short run even if price is below marginal cost. If marginal cost is rising with increasing output, average cost must also be rising. Fixed cost is the same at each output level except when no output is produced. When a firm produces no output, there are no fixed costs. b. Allsmart’s demand curve is given by Q=10-P for its dishwashers. The marginal and average cost is $3 per dishwasher produced. Complete the following table.
The profit-maximizing quantity is the one at which the marginal revenue of the last unit was: O greater than the marginal cost. O less than the marginal cost. O equal to the marginal cost. O zero.
Question 3 The current market price in a competitive industry is $15. Every firm in the industry operates a technology that implies costs described by the function C = 12.5 + 0.3Q2. In the future, the technology is expected to change, and the new cost function will then be C = 10 + 0.2Q2. How much profit is the typical firm making today and in the long run? O. Profit is zero both today and in the long run. O. Profit is 125 both today and in the long run. O. Profit is 175 today and zero in the long run. O. Profit is 250 today and 125 in the long run.