You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The number of farms can new firms enter the market? If they can, what will happen to the market supply curve? If they cannot enter, explain.

You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The number of farms can new firms enter the market? If they can, what will happen to the market supply curve? If they cannot enter, explain.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter9: Perfect Competition

Section: Chapter Questions

Problem 8QP

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You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The profits of farmers based on what happens to the price, what do you think will happen to the profits earned by the firms/farmers that previously existed in the market?
You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The equilibrium output in agricultural markets based on what happens to the price given the change in supply, what do you think will happen to the equilibrium quantity? Will it remain the same, increase or decrease?
You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following?
Use a graph to show the situation that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer.