MICROECONOMICS (LL) W/CONNECT ACCESS
21st Edition
ISBN: 9781264197163
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 11, Problem 3DQ
To determine
Entry and exit of the pure competition.
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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.
A firm sells its product in a perfectly competitive market where other firms charge a price of $110 per unit. The firm estimates its total costs as C(Q) = 70 + 14Q + 2Q2. (LO3) b. What price should the firm charge in the short run? c. What are the firm’s short run profits? d. What adjustments should be anticipated in the long run?
Which of statement is true about economic profit in the long run.(LO2,3).
a) both the monopolistic and perfect competitor make one.
b) neither the monopolistic nor the perfect competitor makes one.
c) only the perfect competitor makes one.
d) only the monopolistic makes one.
Chapter 11 Solutions
MICROECONOMICS (LL) W/CONNECT ACCESS
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- 1.Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; (b) the steel industry; (c) a Kansas wheat farm; (d) the commercial bank in which you or your family has an account; (e) the automobile industry. In each case, justify your classification. LO1arrow_forwardSuppose 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_forward2. Assume now that the costs of shipping are so large that Australian consumers can buy hand sanitizers from only one designated seller in Australia through both eBay and Amazon and there is no possibility of buying hand sanitizers in person in retail stores or any other online platforms. Explain with the help of a diagram whether this seller would be making a profit or a loss in the short run and in the long-run. Since it is one designated seller selling on two online market platforms (eBay and Amazon) would this be a monopoly or duopoly?arrow_forward
- Consider a set of 1000 companies operating in a competitive market. The supply curve for this market is given by O = 20+2P and the demand curve is given by D = 280-4P, where quantity Q is measured in millions of tons and Price P is measured in monetary units. Considering that the marginal cost of the individual firm is given by 2Q, the quantity Q being measured in thousands of tons, we ask: a) Sketch the market equilibrium and the equilibrium of an individual firm. b) What is the situation of this market at that particular moment. c) Make considerations about the long-run equilibrium trend of this market.arrow_forwardSuppose you are a perfectly competitive firm producing computer memory chips. Your production capacityis 1000 units per year. Your marginal cost is $10 per chip up to capacity. You have a fixed cost of $10,000 ifproduction is positive and $0 if you shut down. What are your profit-maximizing levels of production andprofit if the market price is ( a ) $5 per chip, ( b ) $15 per chip, and ( c ) $25 per chip? For case ( b ), explainwhy production is positive even though profits are negative?arrow_forwardQuestion 3 The current market price in a competitive industry is $15. Every firm in the industry operates a technology that implies costs described by the function C = 12.5 + 0.3Q2. In the future, the technology is expected to change, and the new cost function will then be C = 10 + 0.2Q2. How much profit is the typical firm making today and in the long run? O. Profit is zero both today and in the long run. O. Profit is 125 both today and in the long run. O. Profit is 175 today and zero in the long run. O. Profit is 250 today and 125 in the long run.arrow_forward
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