MICROECONOMICS W/CONNECT >IC<
20th Edition
ISBN: 9781259890031
Author: McConnell
Publisher: MCG
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Chapter 11, Problem 2P
To determine
Average Total Cost .
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If there were 30 firms in this market, the short-run equilibrium price of copper would be______ per pound. At that price, firms in this industry would . Therefore, in the long run, firms would _______ the copper market.
Because you know that competitive firms earn_____ economic profit in the long run, you know the long-run equilibrium price must be__________
per pound. From the graph, you can see that this means there will be _______ firms operating in the copper industry in long-run equilibrium.
True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.
True
False
Assume that a firm in a perfectly competitive industry has the following total cost schedule:
Calculate a marginal cost and an average cost schedule for the firm to complete the following table.
Output
Total Cost
Marginal Cost
Average Cost
(units)
($)
($)
($)
10
440
15
600
20
720
25
900
30
1,200
35
1,540
40
1,920
If the prevailing market price is $68 per unit, units will be produced. Profits per unit will be and total profits will be .
Is the industry in long-run equilibrium at this price?
No
Yes
Assume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE).
Using our side-by-side graph, depict the market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any.
Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting).
assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves.
market price is always greater than the minimum of the AVC curve.
Chapter 11 Solutions
MICROECONOMICS W/CONNECT >IC<
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