Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 22, Problem 7CQ
To determine
Shut down point of a perfect competitive firm.
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What is the profit maximizing quantity of output?
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In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase the price until economic losses are zero. True False
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Economics: Private and Public Choice (MindTap Course List)
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- Many economists would argue that there is no such thing as perfect competition in the real world. What limitations to that theory would support their argument?arrow_forwardShow a firm that is earning zero economic profits, but has some market power. Then, assume this market power is entirely eliminated when a new competitor enters the market with the same technology and produces a perfect substitute. Showing in your diagram how the firm must adjust its production level to most effectively compete with the new entering firm, explain why maintaining competition is important.arrow_forwardFirms in the market for soccer balls are selling in a purely competitive market. A firm in the soccer ball market has an output of 5,000 balls, which it sells for $10 each. At the output level of 5,000 the average variable cost is $6.00, the average total cost is $7.50, and the marginal cost is $10.00. What would you expect the firm to do in the short run? Why? What would you expect the market to do in the long run? Why?arrow_forward
- Explain how a firm would maximise its profit, assuming that it faces conditions of perfect competition, in both the short run and the long run.arrow_forwardHow much profit is the typical firm making? at what equilibrium price are all economic profits eliminated? how many firms will be producing frisbees at long term price?arrow_forwardIdentify this firm's profit-maximizing rate of output? how many frisbees are being sold? how much profit is typical firm making? at what equilibrium price are all economic profits eliminated? how many firms will be producing frisbees at this long-term price?arrow_forward
- Which of the following is a reason why firms in a perfectly competitive market have no influence over price? Barriers exist to enter the market. All firms in the market sell identical products. There are many sellers that produce similar, but not identical, products. Buyers and sellers lack perfect information about the product and pricing.arrow_forwardWhat is the formula for profit maximization by firm ? Why does this result in the marginal cost curve becoming the same as the supply curve for firms in perfect competition? what is the difference between the short run and long run ? Why does this difference matter in our discussion of firm behavior?arrow_forwardWHY SOME FIRMS MIGHT BE ABLE TO CONTINUE TO MAKE AN ACONOMIC PROFIT IN THE LONG RUN?arrow_forward
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