Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 22, Problem 2CQ
To determine
The changes of market price in the long run.
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Students have asked these similar questions
Give an example of a price at which this firm would want to produce and sell output in the short run, but not in the long run.
Firms in a perfectly competitive market are said to be "price takers" - that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfect competitive market, but you are not happy with its price, would you raise the price, even by a cent?
In the long run, perfectly competitive firms make zero economic profit. If this is the case, why does the firm even bother producing? Why not exit the market completely?
Chapter 22 Solutions
Economics: Private and Public Choice
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Similar questions
- If new technology in a perfectly competitive market brings about a substantial reduction in costs of production,how will this affect the market?arrow_forwardFirms in a perfectly competitive market are said to be “price takers”—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?arrow_forwardIf firms in a competitive industry incur an economic profit, what happens to supply, price, output, and economic profit in the long run? Explainarrow_forward
- Why don't firms in a competitive market have excess capacity in the long run?arrow_forwardCan excess profit be earned in perfectly competitive markets in the long run. Explain.arrow_forwardExplain why economic profits in all perfectly competitive markets will tend toward zero in the long run. Is this a good thing or a bad thing for producers and consumers? Explain.arrow_forward
- A single firm in a perfectly competitive market is relatively small compared to the rest of the market. What does this mean? How “small” is “small”?arrow_forwardIn a perfectly competitive market, how do we go from a short run equilibrium to a long run equilibrium?arrow_forwardExplain in detail how purely competitive markets, in the long-run, know how to adjust to and provide the correct output, at the correct price. Give an example of a good or service you might buy that is closest to being in a purely competitive market. Explain your logic.arrow_forward
- What does zero economic profits in the long-run mean to the owner of a business operating in a perfect competitive market?arrow_forwardSuppose a corn dog stand market is perfectly competitive and in long-run equilibrium. One day, the city starts imposing a $300 per year tax on each stand. How does this policy impact the number of corn dogs produced and sold in the market in the short run and long run? Down in the short run and no change in the long run No change in the short run and down in the long run Up in the short run and no change in the long run No change in the short run and up in the long runarrow_forwardWhat determines the slope of the Market Supply Curve over the long run? Discuss some reasons why it might have an upward slope, and how these reasons differ from those that cause an upward sloping supply curve in the short run.arrow_forward
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