Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 12, Problem 4P
To determine
The level of output at which the loss is minimized and the reasons for producing in short run rather than shut down is to be determined.
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In a perfectly competitive market, please compare the short run and long run prices in an increasing cost industry. Are they same? If yes, what drives the equal prices? If not, what is the main reason of that difference?
The agricultural market for corn can be characterized as a purely competitive industry. How will an increase in the cost of fertilizer that is sold to corn farmers affect the short-run costs and output for a farm in the industry? How will this affect the profit of the individual farm?
Suppose independent truckers operate in a perfectly competitive industry. If these firms are earning positive economic profits, what happens in the long run to the following: the price of trucking services, the industry quantity of output and the profits of trucking firms?
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- Would independent trucking fit the characteristics of a perfectly competitive industry?arrow_forwardJackson Hardware, a firm in the perfectly competitive custom hardware industry, asks you for your expert economic opinion. They tell you the following: - MC is $200/unit- Quantity produced 550 units - Total Revenue: $110,000 - Total FC are $80,000 - Total VC are $100,000 What is your advice based upon the info above?a) keep operating and increases productionb) shut down right nowc) keep operating but decreases productiond) Keep operating and do not change production at allarrow_forwardThe Emerald Company, a firm in the perfectly competitive custom jewelry industry, asks you for your expert economic opinion. They tell you the following: Total revenue is $110,000, Total fixed costs are $80,000 Total variable costs are $100,000 Marginal cost is $220/unit Quantity produced is 550 unit What is your advice based upon the information above? Keep operating and do not change the current production level. Keep operating and increase production Keep operating but decrease production Shut-down immediatelyarrow_forward
- A perfectly competitive firm currently sells each unit of output at $3 and faces an average total cost of $5 at optimal output. What should the firm do? 1) Exit the industry as it is making a loss. 2) Continue to produce at the current output. 3) Continue to produce but reduce output. 4) Not possible to tell.arrow_forwardthe short-run supply curve of a perfect competitive firm is the same as that portion of the marginal cost curve, over and above the minimum portion of the AVC. with graphic support carefully proof this .arrow_forwardGiven the following short run production cost schedule: Short Run Total Cost Function Quantity Produced Total Cost ($) 0 20 10 27 20 38 30 53 40 73 50 100 60 130 The table above gives the short run total cost function for a typical firm in a perfectly competitive industry. Please answer related questions below If the firm enjoys market power than the firm’s market price will be higher or lower than the competitive market price? Why?arrow_forward
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