8. Short-run and long-run effects of a shift in demandSuppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 50million pounds per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in seitan arelinked to chronic illness.The FDA's research is expected to cause consumers to demand seitan at every price. In the short run, firms will respondbyShift 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 pod01020SupplyIn the long run, some firms will respondbyDemandTOQUANTITY (Mons of pounds)20 100DemandSupplyuntilShift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the FDA's researchand the new long-run equilibrium after firms and consumers finish adjusting to the news. In the long run, some firms will respondbyShift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the FDA's researchand the new long-run equilibrium after firms and consumers finish adjusting to the news.PRICE (Dollars per pod10a20SupplyDemand2050 80 TOQUANTITY (Millions of pounds)80until20 100DemandSupplyThe new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry isthe long run.

Short-run is a period when some elements of production is fixed and some are variable. Output can be…

Short-run and long-run effects of a shift in demand uppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 50 million pounds per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in seitan are nked to chronic illness. the FDA's research is expected to cause consumers to demand seitan at every price. In the short run, firms will respond У hift 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 pod 1 0 a 20 the long run, some firms will respond У Supply 80 ТО QUANTITY (Mons of pounds) hift the demand sunce the supply un Demand 100 Demand Supply until bath on the following aranh bn illustrate both the chartmunffate of the FDA

Short-run and long-run effects of a shift in demand uppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 50 million pounds per year. Suppose that the Food and Drug Administration (FDA) reports that compounds naturally occurring in seitan are nked to chronic illness. the FDA's research is expected to cause consumers to demand seitan at every price. In the short run, firms will respond У hift 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 pod 1 0 a 20 the long run, some firms will respond У Supply 80 ТО QUANTITY (Mons of pounds) hift the demand sunce the supply un Demand 100 Demand Supply until bath on the following aranh bn illustrate both the chartmunffate of the FDA

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 5PA

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Similar questions

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?
What prevents a perfectly competitive firm from seeking higher profits by increasing the price that it charges?
Explain in words why a profit-maximizing film will not choose to produce at a quantity where marginal cost exceeds marginal revenue.
14. At what price level would a firm's short-run supply curve begin? A-The price at the minimum of the average variable cost curve B-The price at the profit-maximizing point of production C-The price at the intersection of the average total cost curve and the marginal cost curve D-The price at which demand changes from its elastic to inelastic range E-The price at which marginal cost equals marginal revenue 3. A monopolist is forced to lower its price in order to sell another unit of its product. This describes the problem of A-persistent economic profits B-market power C-diseconomies of scale D-economies of scale E-market discrimination
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?
13. Suppose a representative firm in a perfectly competitive industry has the following totalcost of production in the short run: TC=Q^3-40Q^2+600Q.a. What will be the long run equilibrium quantity for the firm? What will be the longrun equilibrium price in this industry?b. Let the industry demand be given by QD=12400-4P. How many firms will be activein the long-run equilibrium?c. Suppose the firm faces a positive demand shock that increases the industry demandto QD=16000-4P. Describe how the industry would respond and calculate thechange in the number of firms.
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…
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…
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…
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…
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.
7) Refer to Figure 13-15 to answer the following questions. What is the profit-maximizing output level? What is the profit-maximizing price? What is the average total cost at the profit-maximizing output level? What area represents the firm's profit? At which output level are economies of scale exhausted? Does this graph most likely represent the long run or the short run? Why?