In a competitive market with free entry and exit from the market a permanent rise in demand will lead to Select one or more: O a. excess profits being made in the short run (before new firms can enter) O b. normal profits being made in the long-run O c. a permanent rise in prices O d. entry by new firms
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- 8. In a perfectly competitive market:a. All goods or services in that market are similarb. The price is set by market equilibrium and individual sellers cannotinfluence the pricec. Sellers strive to supply the greatest quantity of the good or service at thelowest priced. Small groups of buyers and sellers can have a great influence on pricesConsider the market for electronic components ("chips") and assume that there is complete competition.1a) Graph the short-run market equilibrium in a supply-demand diagram. 1b) Due to entry restrictions, there are long waiting times and thus supply passports. Show what impact these supply bottlenecks have on the market for electric cars. For this purpose, graphically represent the situation with and without supply bottlenecks in a supply-demand diagram. Label the old and new market equilibrium as well as the new and old consumer and producer surplus. Be sure to include the necessary labels in your diagram. 1c) Since the effects on the market for electric cars related to the supply bottleneck are not desirable from a macroeconomic perspective, the government is considering intervening with economic policy measures. In your diagram from 1b), show why the effects addressed are not desirable from a macroeconomic perspective. Also explain this briefly in the text or annotated keywords.1d)…lumber market in Australia Suppose the demand and the supply for lumber (harvested wood processed in a sawmill) used for construction in Australia are given by QD =100 – 2P QS = 1 2 P Assume also that the market is perfectly competitive. 5. Now suppose a pandemic hits and the government introduces a Homebuilder Scheme, which provides up to a fixed amount of money towards building a home or renovating an existing one. As a result, there is an increase in construction projects. Use a demand and supply graph to explain how this affects the equilibrium price and quantity in the market. 6. A number of factors now affect the market at once. First, the price of oil rises, increasing transportation costs. Second, landowners who supply logs to sawmills decide to hold off on cutting trees in response to the market conditions described in 5. Use a demand and supply graph to explain how these two events affect the equilibrium price and quantity. Show changes relative to the equilibrium you…
- (a) Complete the table.(b) Identify the equilibrium output and price.(c) How much profits does the firm earn at equilibrium output?(d) Is the firm operating in a perfect or imperfect market and is the? firm earning supernormal profit, subnormal profit or normal profitShow graphically how following situation affects company and market: A competitive company produces 100 units at a price P = $10 and its minimum cost is $8 (zero or null profit). If price is considered a high price in market:(a) What happens to supply curve in the market?b) What happens to equilibrium price and quantity in market?c) What happens to equilibrium price and quantity in firm?Describe the course of events in a competitive market following apermanent increase in demand. What happens to output, price, andeconomic profit in the short run and in the long run? Describe the course of events in a competitive market following theadoption of a new technology. What happens to output, price, andeconomic profit in the short run and in the long run?
- ANSWER IF TRUE OR FALSE: no need for long explanation. 1. The welfare of the consumers is maximized under a purely competitive market. 2. It is easy to exit or stop production if the market condition is no longer profitable if there is very low investment in fixed assets. 3. Patents and copyrights serve as barriers in entering an industry and in competing against the already existing producers.2. List the features that characterize a perfect competitive market. 3. What is a perfectly competitive market? Perfectly competitive markets establish capitalist justice and maximize utility in a way that respects buyers’ and sellers’ negative rights? Explain how and what types of negative rights are respected.Q) The short-run market demand andsupply for Kente cloth are expressed as follows:Demand: ? = 40−0.25?Supply: ? = 5+0.05?Marginal cost: −20 +4? a)The short-run level of output is ___________ metres.[1] 40.00[2] 5.05[3] 35.30[4] 20.00[5] 7.71
- Consider a competitive market where firms are earning zero economic profit. Assuming no changes to supply and demand in this market, what will happen to the firms in this market? a) Firms in this market will exit b) Firms in this market will raise prices c)Firms in this market will lower prices d) Firms in this market will encourage others to enter the market e) None of the above 2. Suppose the market referred to in the previous problem is suddenly hit by a decrease in tastes and preferences. What will happen to Q in this market in the long run (relative to the initial equilibrium)? a) It will decrease b) It will not only decrease but fall to zero c)It will be unchanged d) It will increase e) It will be affected by what is known as the “Kazarosyan Effect” 3. In terms of which of the following is the monopoly greater than the competitive market? a) Prevalence b) The number of firms c)Market quantity d) Market power of a firm e) c and d 4. Which of the following is an example of a…A firm collect $300 by selling 5 bicycle and collect $330 by selling 6 bicycle. Is this seller in a perfectly competitive market?M/c question - Micro 31) Refer to Figure 14-13. When a firm in a competitive market, like the one depicted in panel (a), observes market price rising from P1 to P2, what is most likely the cause? A. the exit of existing firms in the market B. an increase in market supply from Supply0 to Supply1 C. the entrance of new firms into the market D. an increase in market demand from Demand0 to Demand1 30) A profit-maximizing firm in a competitive market discovers that, at its current level of production, price is greater than marginal cost. What should it do? A. It should increase its output. B. It should reduce its output but continue operating. C. It should shut down. D. It should keep output the same.