Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Textbook Question
Chapter 14, Problem 4SPA
a. Do you expect other firms to enter the Web sweatshirt business and compete with Sara?
b. What happens to the
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Use the figure below, which shows the situation facing Mike’s Bikes, to answer the questions below. The demand and costs of other mountain bike producers are similar to those of Mike’s Bikes.
What quantity does the firm produce and what is its price? Calculate the firm’s economic profit or economic loss.
What will happen to the number of firms producing mountain bikes in the long run?
How will the price of a mountain bike and the number of bikes produced by Mike’s Bikes change in the long run? How will the quantity of mountain bikes produced by all firms change in the long run?
Is there any way for Mike’s Bikes to avoid having excess capacity in the long run?
Is the market for mountain bikes efficient or inefficient in the long run? Explain your answer.
Q2. Ramzah owned a burger stands along the beach. Figure 2 shows Ramzah’s cost curves.
Figure 2: Market for Burger
(a) What is Perfect Competition?
(b) If the market price of a burger is $4, what is Ramzah’s profit-maximizing output? (c) Calculate the economic profit that Ramzah’s makes.
(d) With no change in demand or technology, how will the price change in the long run?
(e) Distinguish between technological efficiency and economic efficiency.
Question 3: The situation facing by firm “Smart”, a producer of running shoes, is shown in the following figure.
Figure attached and can see in end
What quantity does Smart Shoes produce?
Answer:
2. What is the price of a pair of Smart shoes?
Answer:
3. What is Smart’s economic profit or economic loss?
Answer:
4. Why MR curve is below to demand curve?
Answer:
Question 4: In the market for running shoes, all the firms face a similar demand curve and have similar cost curves to those of Smart in question 3.
a.) What happens to the number of firms producing running shoes in the long run?
Answer:
b.) What happens to the price of running shoes in the long run?
Answer:
c.) What happens to the quantity of running shoes produced by Smart in the long run?
Answer:
d.) What happens to the quantity of running shoes in the entire market in the long run?
Answer:
e. ) Does Smart shoes have excess capacity in the long run?
Answer:
f.) Why, if Smart firm shoes has…
Chapter 14 Solutions
Macroeconomics
Ch. 14.1 - Prob. 1RQCh. 14.1 - Prob. 2RQCh. 14.1 - Prob. 3RQCh. 14.2 - Prob. 1RQCh. 14.2 - Prob. 2RQCh. 14.2 - Prob. 3RQCh. 14.2 - Prob. 4RQCh. 14.2 - Prob. 5RQCh. 14.3 - Prob. 1RQCh. 14.3 - Prob. 2RQ
Ch. 14.3 - Prob. 3RQCh. 14.3 - Prob. 4RQCh. 14.3 - Prob. 5RQCh. 14 - Prob. 1SPACh. 14 - Prob. 2SPACh. 14 - Prob. 3SPACh. 14 - a. Do you expect other firms to enter the Web...Ch. 14 - Prob. 5SPACh. 14 - Prob. 6SPACh. 14 - Prob. 7SPACh. 14 - Prob. 8SPACh. 14 - Prob. 9SPACh. 14 - Prob. 10APACh. 14 - Prob. 11APACh. 14 - Prob. 12APACh. 14 - Prob. 13APACh. 14 - Prob. 14APACh. 14 - Prob. 15APACh. 14 - Prob. 16APACh. 14 - Prob. 17APACh. 14 - Prob. 18APACh. 14 - Prob. 19APACh. 14 - Prob. 20APACh. 14 - Womens Golf Clubs A quarter of golfers today are...Ch. 14 - Prob. 22APACh. 14 - Prob. 23APACh. 14 - Prob. 24APACh. 14 - Prob. 25APACh. 14 - Prob. 26APACh. 14 - Prob. 27APACh. 14 - Prob. 28APACh. 14 - Prob. 29APA
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- Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the firm not simply increase its profits by selling an extremely high quantity?arrow_forwardWhat price will a perfectly competitive firm end up charging up the long run? Why?arrow_forwardHannah has a small business making clothing alterations. Which of the following products would dramatically affect her profit margins if the price were to decrease for that product? A. dresses B. thread C. sewing machinesarrow_forward
- Graph the demand curve for a pure competitive firm, label the graph. What is the relationship between marginal revenue (MR) and the demand curve (is MR greater, equal, or less than the demand curve)?arrow_forwardDuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.a) For each price, find the total revenue, the total cost, and the profit.b) If the market was under perfect competition, what would be the price and the quantity ofpencils traded in the long run? Why?c) If there was only one seller on the market, what would be the price and the quantity ofpencils traded? Why?arrow_forwardDuopolyMarket for mechanical pencils can be described by the following demand schedule:Price | Number of pencils demanded$6 | 80$5 | 200$4 | 320$3 | 440$2 | 560$1 | 680$0 | 800The fixed cost is $340, while the variable cost is $0.50.a) For each price, find the total revenue, the total cost, and the profit.b) If the market was under perfect competition, what would be the price and the quantity ofpencils traded in the long run? Why?c) If there was only one seller on the market, what would be the price and the quantity ofpencils traded? Why?d) If there were two firms on the market and they agreed to cooperate, how much would eachfirm need to produce? Follow the procedure outlined in the lecture and show that the otherfirm would prefer to deviate from the agreement.e) When the firms deviate from the agreement, there is a new optimal level of output. Showwhether the firms have an incentive to deviate from that level?f) If there were two firms on the market, what would be the price and the…arrow_forward
- Rebecca owns Louisiana Sugar Company, a manufacturer of sugar. Since there are lots of domestic manufacturers and importers of sugar and it is difficult to practice brand differentiation, the sugar industry is highly competitive. Suppose the demand for sugar increases. (1) What will be the effect on the market price and quantity of sugar in the short run and in the long run? Explain why. (2) What will happen to the economic profits of Louisiana Sugar Company in the short run and in the long run? Explain why.arrow_forwardThere are no long run econoic profit in monopolistic competition although there may be economic profit in the shprt run. Do you agree? Explain using Illustrationsarrow_forwardWhat does it mean to say that: “A firm operating under perfect competition conditions is a pricetaker"?Why Can't this firm set any price it chooses? What if it operates in a monopolisticallycompetitive market, would it be able to set the price? Why? Give some real life examples tosupport your answer.2. You overheard Mr. John, the newly-hired marketing manager, saying: “I think our company shouldtake advantage of economies of scale by increasing output, thereby spreading out our overheadfixed costs”.Would you agree with this statement? If not, provide a better description for the term“economies of scale”. Explain how they may be achieved by organizations. Highlight what wouldprevent them to occur.3. For many, the principle “marginal revenue equal marginal cost" condition for profit maximizationis rather confusing.Discuss the rationale behind the condition, highlighting how different it is from the break-evenanalysisarrow_forward
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