Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 12, Problem 14P
To determine
(a)
The effect of rise in demand on the firm's output, profit, price and MR.
To determine
(b)
The effect of industry's increasing demand on the price, MR and output of a
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Suppose that firm is in a breaking even status in a perfectly competitive market. Using graphs (for both industry and firm) to explain how a decline in demand in the short run affects some firms’ performance (e.g., earn profits or experience loss). In the long run, how this results in exit of some firms from the same perfectly competitive market. Comment on the market equilibrium quantity and price in the long run?
explain why is the long run market supply curve horizontal in long run in perfect competitive market?
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When might a competitive firm shutdown in the short run and exit the market in the long run?
Use a graph to demonstrate the scenario where a competitive firm would be earning positive profit in the short run. Can this scenario be maintained in the long run? Why?
What are the ‘shutdown point’ and ‘break even point’ of a competitive firm . Explain with diagram.
A competitive market starts in a situation of long run equilibrium. Then there is an increase in demand. Explain what happens in the short run and long run, using necessary diagrams.
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