EBK ECONOMICS
13th Edition
ISBN: 8220106799642
Author: PARKIN
Publisher: PEARSON
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Chapter 12.5, Problem 2RQ
To determine
What happens to output,
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60. In a perfectly competitive market, which of the following will increase the economic profit the firms make in the short run?
A. an increase in labor costs
B. a decrease in market demand
C. an increase in market demand
D. an increase in the number of firms
20. Paulina sells beef in a competitive market where the price is $6 per pound. Her total revenue and total costs are given in the table below.
Fill out the table.
At what quantity does marginal revenue equal marginal cost?
What is the profit-maximizing quantity?
Co
Assignment Content
1) When the Price is $4 the quantity supplied of hats is 100. If the price changes to $6 dollars and the quantity supplied changes to
400, is the elasticity of supply elastic, inelastic or unit elastic? How did you reach that conclusion?
2) Why will economic profits for firms in a perfectly competitive industry tend to vanish in the long run? What about accounting
AS
12
Chapter 12 Solutions
EBK ECONOMICS
Ch. 12.1 - Prob. 1RQCh. 12.1 - Prob. 2RQCh. 12.1 - Prob. 3RQCh. 12.1 - Prob. 4RQCh. 12.2 - Prob. 1RQCh. 12.2 - Prob. 2RQCh. 12.2 - Prob. 3RQCh. 12.3 - Prob. 1RQCh. 12.3 - Prob. 2RQCh. 12.3 - Prob. 3RQ
Ch. 12.4 - Prob. 1RQCh. 12.4 - Prob. 2RQCh. 12.5 - Prob. 1RQCh. 12.5 - Prob. 2RQCh. 12.5 - Prob. 3RQCh. 12.6 - Prob. 1RQCh. 12.6 - Prob. 2RQCh. 12.6 - Prob. 3RQCh. 12.6 - Prob. 4RQCh. 12 - Prob. 1SPACh. 12 - Prob. 2SPACh. 12 - Prob. 3SPACh. 12 - Prob. 4SPACh. 12 - Prob. 5SPACh. 12 - Prob. 6SPACh. 12 - Prob. 7SPACh. 12 - Prob. 8SPACh. 12 - Prob. 9SPACh. 12 - Prob. 10APACh. 12 - Prob. 11APACh. 12 - Prob. 12APACh. 12 - Prob. 13APACh. 12 - Prob. 14APACh. 12 - Prob. 15APACh. 12 - Prob. 16APACh. 12 - Prob. 17APACh. 12 - Prob. 18APACh. 12 - Prob. 19APACh. 12 - Prob. 20APACh. 12 - Prob. 21APACh. 12 - Prob. 22APACh. 12 - Prob. 23APA
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- In a competitive market with free entry and exit from the market a permanent rise in demand will lead to Select one or more: a. normal profits being made in the long-run b. excess profits being made in the short run (before new firms can enter) c. entry by new firms d. a permanent rise in pricesarrow_forwardBasti’s Coffee operates in a competitive market. The short run price in the coffee market is equal to Basti’s Coffee average variable cost. a. Using two correctly labeled graphs show the coffee market side by side with Basti’s Coffee. Clearly indicate which graph represents the market and which represents Basti’s Coffee. In your graph identify: i. price and quantity in the coffee market (3) ii. price and quantity for Basti’s Coffee (3) iii. The area of economic profit or loss for Basti’s Coffee (3)arrow_forwardFigure 14-7 Graph (a) Graph (b) MC ATC P: P, P, D. Q. Q; Q, Q, Q, Q2 QUANTITY QUANTITY Refer to Figure 14-7. Suppose a firm in a competitive market, like the one depicted in graph (a), observes market price rising from P1 to P2. Which of the following could explain this observation? a. The exit of existing consumers from the market. b. An increase in market supply from So to S1. C. An increase in market demand from Do to D1. d. The entry of new firms into the market. PRICE a" a" PRICEarrow_forward
- 16. The accompanying graph shows the short-run demand and cost situation for a price searcher in a market with low barri- ers to entry. a. What level of output will maximize the firm's profit level? b. What price will the firm charge? c. How much revenue will the firm receive in this situation? How much is total cost? Total profit? d. How will the situation change over time?arrow_forward7. In a perfectly competitive market you can expect the following changes to occur in long run if firms are operating at economic profit in short run: a. P increases, Qmarket decreases, qfirm increases b. P increases, Qmarket increases, qfirm increases c. P decreases, Qmarket increases, qfirm increases d. P decreases, Qmarket increases, qfirm decreasesarrow_forward5. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for reusable totes. PRICE (Dollars per lote) 40 36 32 24 20 12 8 0 MC + 2 ATC Price (Dollars per tote) 10.00 16.00 40.00 AVC 4 6 10 12 QUANTITY (Thousands of totes) 8 16 Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Quantity (Totes) 18 20 Total Revenue (Dollars) Fixed Cost (Dollars) 44,000 44,000 44,000 Variable Cost (Dollars) Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC) in the short run.…arrow_forward
- 10. Price elasticity of supply in the short run and long run The following graph shows the short-run supply curve for pecans. Place the orange line (square symbol) on the following graph to show the most likely long-run supply curve for pecans. (Note: Place the points of the line either on N and G or on N and Z.) PRICE (Dollars per pound) 24 20 16 2 to 2 4 N 6 8 10 QUANTITY (Thousands of pounds of pecans) ✓ □G Short-Run Supply 12 Long-Run Supply (?)arrow_forward14. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for fitness trackers. PRICE (Dollars per tracker) 8888888 20 10 ATC MC AVC 10 20 30 40 50 GO 70 00 90 100 QUANTITY (Thousands of tracker) Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) Price (Dollars per tracker) Quantity (Trackers) Total Revenue (Dollars) Fixed Cost (Dollars) Variable Cost (Dollars) Profit (Dollars) 25.00 520,000 40.00 65.00 520,000 520,000 If the firm shuts down, it must incur its fixed costs (FC) in…arrow_forward1. The market for manicures and other nail treatments is very competitive. How would the following developments affect the number of nail treatments that a typical nail salon wants to supply in the short run? a. Heightened concern about their appearance causes people to want more manicures at a given price. b. The government requires all nail salons to pay a new yearly licensing fee to operate. c. Worse job prospects elsewhere in the economy cause more people to want to become manicurists, causing the wages of manicurists to fall.arrow_forward
- 8. Short-run and long-run effects of a shift in demand Suppose that the tempeh industry is initially operating in long-run equilibrium at a price level of $5 per pound of tempeh and quantity of 150 million pounds per year. Suppose a top medical journal publishes research that animal-alternative protein sources such as tempeh could decrease your expected lifespan by 4 years. The publication is expected to cause consumers to demand tempeh at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the publication. PRICE (Dollars per pound) 10 9 8 00 m 2 1 0 0 Supply In the long run, some firms will respond by Demand 30 60 90 120 150 180 210 240 270 300 QUANTITY (Millions of pounds) Demand Supply untilarrow_forward1. Assume a perfectly competitive market. Draw the average total cost, average variable cost, marginal cost, and marginal revenue curves for a good. Determine the profit-maximizing level of output given that the price of the good is above the minimum average variable cost but below the minimum average total cost Is the profit at the chosen price point positive, zero, or negative ? Shade the area representing profitarrow_forwardexplain your answers in detail and use graphs whenever appropriate: The market for rental cars is very competitive. How would the following developments affect the quantity of car rentals that a typical rental car company wants to supply in the short run? a. With the easing of fears about Covid 19, people are more excited to travel than before. b. Local governments reduce the yearly fee that rental car companies have to pay for their facilities. Note, these fees do not vary with how many cars the company rents. c. Rental car companies have to pay higher wages for their workers. Suppose that initially the market for rental cars is in long-run equilibrium. a. What does the fall in the yearly fee rental car companies have to pay for their facilities do to the profits of a typical rental car company in the short run? b. What will happen to the equilibrium price and quantity of rental cars in the long run? Why? What will happen to the profits of a typical rental car company in the long run?arrow_forward
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