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Refer to Figure 10.1 for the following questions.
Figure 10.1
In Figure 10.1, which of the points are possible long-run equilibriums?
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- Which point or points on the figure at right illustrate a short-run equilibrium? A. Point A B. Point B C. Point C D. Points A and CIs this a long run equilibrium? Why or why not?18. Which of the following are short-run decisions and which arelong-run decisions?a. General Motors decides to add a second shift to itsArlington, Texas production plant.b. Gotham Foods International chooses to exit the restaurantindustry to concentrate on its wholesale grocerysupply business. c. The Sahara Hotel and Casino in Las Vegas closes two of itsthree hotel towers in response to low demand.d. Tony Andretti, owner of Tony the Taxman, hires five newCPAs to work at his tax preparation business.e. German tool and appliance manufacturer Bosch enters theelectric bicycle industry in 2010.f. General Electric builds a new offshore wind manufacturingplant in the United Kingdom.
- Determine whether each of the statement is true, false, or uncertain. If the statement is false or uncertain, please correct the statement to make it true. If the statement is true, please explain your answer briefly. Give a brief definition of any underlined term. Economies of scale causes the long-run market supply curve to rise as price increases.Suppose that a firm that produces face masks is in a long-run equilibrium setting where it has 3 units of capital and 3 units of labor, where MRTS = w/r, and where the firm is maximizing profits. Then suddenly in March 2020, the price of face masks increases due to increasing demand: In a graph with capital on the y-axis and labor on the x-axis, graph how the increase in price will change the firm’s input choices (labor and capital) in the short-run (when only labor can adjust). Will the new choice of inputs be on the expansion path? Suppose that new entry into the face mask production industry is impossible. In the same graph, graph how the increase in price will change the firm’s input choices in the long-run (when both labor and capital can adjust). Will the new choice of inputs be on the expansion path? Now suppose that entry into the face mask industry is free and that this is a constant cost industry. What will happen to the price in the long run? How will the firm’s input…Explain why a long-run supply curve might slope upward.
- Short-run and long-run effects of a shift in demand Suppose that the shrimp industry is in long-run equilibrium at a price of $5 per pound of shrimp and a quantity of 300 million pounds per year. Suppose that the Centers for Disease Control (CDC) announces that a chemical found in shrimp is causing bacterial infections to spread around the world. The CDC’s announcement will cause consumers to demand ______ shrimp at every price. In the short run, firms will respond by_____. Shift the demand curve, the supply curve, or both on the following diagram to illustrate these short-run effects of the CDC’s announcement. (TABLE 1) In the long run, some firms will respond by ______ until _______. (TABLE 2) The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is _____ in the long run. Shift the demand curve, the supply curve, or both on the following diagram to illustrate both the short-run effects of the…long run equilibrium (label this point A in your graph) then draw the short-run impact of the described change and label the new short-run equilibrium as point B in your graph. Finally draw the new long run equilibrium situation after full adjustment to the described changes and label this long run equilibrium as point C in your graph. Your graph for each situation should contain the initial LRAS, AD and AS curves as well as the any new curves that occur in response to the described change. On the graph be sure to mark the actual path the economy follows as it moves along the AS and AD curves. Give a brief description in words of what happens in the short run and long run in each scenario. There is an enormous drought that affects crop yields throughout the country.Long-run: Assume you are examining the economy of India. Assume the Indian economy is initially in equilibrium. Suppose a war breaks out between India and neighboring Pakistan. What happens to Indian equilibrium if 500,000 Pakistanis immigrate to India in the span of a year? Analyze this strictly in the context of production. Group of answer choices real GDP rises, price level rises real GDP rises, price level falls real GDP falls, price level rises real GDP falls, price level falls
- A6 “Commodity-rich Australia is one of the very few countries to receive an economic growth upgrade by the International Monetary Fund, after the global outlook was slashed due to war in Ukraine and soaring inflation.” (Financial Review, 11 April 2022). “Australia’s economy has received a boost from the surge in the price of commodities such as gas, iron ore, coal and wheat”, said IMF division chief for Australia, Harald Finger. a. Assume that Australia’s economy is in its medium-run equilibrium (i.e. Y_t = Y_n and u_t = u_n) where Y_t represents the level of output in year t; u_t is the unemployment rate in year t; u_n is the natural rate of unemployment. Use the multiplier model diagram to illustrate the impact on Australia’s GDP from an increase in net export due to increase in commodity prices. Show the output gap in your graph.below is a SRAS euqation. Y=200+ 0.4(P−10) - If the long-run equilibrium output changed to 250, how would the output level change: Decrease, Increase,or No change? - Additionally, if the equilibrium output stayed at 200 but if the expected price changed to 8, how would the output level change: Decrease, Increase, or No changeWhy Law of Diminishing Returns is a short run law?
