EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 10, Problem 1RQ
To determine
Pure competition.
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Students have asked these similar questions
Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3 a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firm’s MC curve.
Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the
same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.
COSTS (Dollars per pound)
80
72
64
56
co
o
32
+
16
8
0
0
4
MC
0
ATC
AVC
8 12 16 20 24 28
QUANTITY (Thousands of pounds)
32
38, 72
36
40
â’¸
The figure shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces
O A. 20 units of output and earns a normal profit.
MC
ATC
50
B. 10 units of output and incurs an economic loss.
40
O C. 10 units of output and earns a normal profit.
O D. 20 units of output and incurs an economic loss.
30
MR
20
10
10
30
40
Quantity (per day)
Price and costs (dollars)
20
Chapter 10 Solutions
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- 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?arrow_forwardFigure 14-1 Suppose that a firm in a competitive market has the following cost curves: Refer to Figure 14-1. If the market price falls below $6, the firm will earn O a. positive economic profits in the short run. O b. negative economic profits in the short run but remain in business. O c. negative economic profits in the short run and shut down. O d. zero economic profits in the short run. PRICE 20 18 16 14 13 10 8 6 4 2 MC 1 2 3 QUANTITY 4 ATC AVC 5arrow_forwardThe table below describes a firm that sells output in a perfectly competitive market. Note the second column describes total costs. O $8 O $12 O $6 Output O $4 0 1 2 3 4 5 Which of the following market prices would cause the firm's profit-maximizing output level to be equal to 5? 6 Total Cost (in dollars) $3 $9 $14 $18 $23 $30 $40 4arrow_forward
- 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.arrow_forwardQUESTION 8 Two firms with the same (constant) marginal costs are engaging in Bertrand competition. One of the companies exits the industry. As a a consequence, the price for the other firm increases by 50%. What is the elasticity of demand at the new market price? O4 O 3 O 2.5 O More information is needed. 02arrow_forwardThe following figure shows the revenue and cost curves for a firm X. RM 10 a. b. C. 7 6 LO 5 4 3.5 0 20 25 30 MC 40 AVC AC AR=MR Units If a firm X achieves productivity efficiency, what will be the total revenuel generated At what price will a firm stop operating? Please explain. If the market price is RM4.00, what is the total profit or total loss.arrow_forward
- In the table below, the firm; Output Total Revenue Total Cost $0 $30 $60 $90 $120 $150 $180 $25 $49 $69 $91 $117 $147 $180 O a. cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero. O b. must be in a perfectly competitive industry, because its marginal cost curve eventually rises. O c. cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero O d. must be in a perfectly competitive industry, because its marginal revenue is constant. 123 456arrow_forwardTable 14-5 Suppose that a firm in a competitive market faces the following revenues and costs: Quantity Marginal Cost Marginal Revenue (Units) (Dollars) (Dollars) 12 13 14 15 16 17 5 6 7 8 9 10 7 7 7 7 7 7 Refer to Table 14-5. If the firm is maximizing profit, how much profit is it earning? O a. $0.50 O b. $7.50 O c. $10 O d. There is insufficient data to determine the firm's profit.arrow_forwardCH $1.50 $1.25 $0.75 150 9 In the above figure, assume that So represents the industry supply curve and Do represents the demand curve in a perfectly competitive market. What can be said about the demand curve that an individual firm faces? O An individual firm will face a downward sloping demand curve starting at $1.25. O An individual firm will tace a horizontal demand curve at $1.25. O An individual firm will face a vertical demand curve at 250. O An individual firm will face the demand curve indicated by Do 4arrow_forward
- Which of the following statements in the full competitive market is correct? Choose an answer 1. The companies maximize their profit according to the rule «price equals average total costs». O 2. The companies maximize their profit according to the rule "marginal costs equal average total costs". 3. In the short term, the companies always make a profit. O 4. In the short-term market result, it always applies that the market price is above the average total costs. 5. In the long-term market result, the market price corresponds to the average total costs.arrow_forwardThe following graph plots the market demand curve for rhenium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. PRICE (Dollars per pound) 80 72 64 56 48 40 32 24 16 8 Demand 0 0 120 240 360 480 800 720 840 980 1080 1200 QUANTITY (Thousands of pounds) Because you know that competitive firms earn Supply (10 firms) Supply (20 firms) If there were 30 firms in this market, the short-run equilibrium price of rhenium would be $ would . Therefore, in the long run, firms would True Supply (30 firms) False per pound. From the graph, you can…arrow_forward✓ Question Completion Status: A non- competitive firm's demand curve is P = 10-4Q. So its MR is O 5-2Q O 10-40 10-8Q 05-Q QUESTION 3 For a non-competitive firm with a demand curve P = 1800-2Q and marginal costs of MC = $200, how much is the equilibrium quantity (Q)? 360 400 560 620 QUESTION 4 For a non-competitive firm with a demand curve P = 1800-2Q and marginal costs of MC = $200, how much is the equilibrium price (P*)? O $500 (4750 Click Save and Submit to save and submit. Click Save All Answers to save all answers. Save All Ararrow_forward
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