ECON.TODAY (COMPLETE)-TEXT ONLY
18th Edition
ISBN: 9780133882285
Author: Miller
Publisher: PEARSON
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Question
Chapter 23, Problem 23.5LO
To determine
A description of factors that affect the entry and exit decisions of the firms in perfect competing industry and to distinguish between constant cost industry, increasing cost industry, and decreasing cost industry.
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Check out a sample textbook solutionStudents have asked these similar questions
Assume that a firm in a perfectly competitive industry has the following total cost schedule:
Calculate a marginal cost and an average cost schedule for the firm to complete the following table.
Output
Total Cost
Marginal Cost
Average Cost
(units)
($)
($)
($)
10
440
15
600
20
720
25
900
30
1,200
35
1,540
40
1,920
If the prevailing market price is $68 per unit, units will be produced. Profits per unit will be and total profits will be .
Is the industry in long-run equilibrium at this price?
No
Yes
In 2012, the box industry was perfectly competitive. The lowest point on the long-run average cost curve of each of the identical box producers was $4, and this minimum point occurred at an output of 1,000 boxes per month. The market demand curve for boxes was
QD= 140000 - 10000P
where P was the price of a box (in dollars per box) and QD was the quantity of boxes demanded per month. The market supply curve for boxes was
Qs= 80000 + 5000P
Where QS was the quantity of boxes supplied per month.
(a) What was the equilibrium price of a box? Is this the long-run equilibrium price?
(b) How many firms are in this industry when it is in long-run equilibrium?
Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be
Multiple Choice
the same as the initial equilibrium price, but the new industry output will be greater than the original output.
greater than the initial price, and the new industry output will be greater than the original output.
less than the initial price, but the new industry output will be greater than the original output.
the same as the initial equilibrium price, and the industry output will remain unchanged.
Chapter 23 Solutions
ECON.TODAY (COMPLETE)-TEXT ONLY
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Similar questions
- For a constant cost industry in a purely competitive market structure, whenever there is an increase in market demand and price, then the supply curve Group of answer choices Shifts to the right with new firms’ entry and stops at the point where the new long-run equilibrium intersects at the same market price as before. Shifts to the left as some firms leave the market and the market price rises to a new level. Shifts to the right with new firms’ entry and stops at the point where the new long-run equilibrium intersects at a lower market price. The supply curve becomes unstable. and firms leave the market because management costs become very higharrow_forwardin a perfectly competitive market with a constant cost industry, there are currently 100 identical firms, each with the total cost function TC(Q) = Q^2 + 4Q + 36. The market demand is Q = 1800 – 50p. a. What is the price at the short-run equilibrium? What is the net profit/loss of each firm at this price? b. In the long run, how many firms will enter into /exit from the market?arrow_forwardConsider the graphs of a constant cost industry and a perfectly competitive firm within it. Initially, the industry is in long‑run equilibrium at point E, then demand shifts from Demand1 to Demand2. Answer the questions where P is the price, MR is the marginal revenue, AR is the average revenue, MC is the marginal cost, SRATC is the short‑run average total cost, and LRAC is the long‑run average total cost. Manipulate both of the graphs to reflect the adjustments that yield the long‑run equilibrium.arrow_forward
- Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be the same as the initial equilibrium price, and the industry output will remain unchanged. greater than the initial price, and the new industry output will be greater than the original output. the same as the initial equilibrium price, but the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output.arrow_forwardIn a perfectly competitive market with a constant cost industry, there are currently 100 identical firms, each with the total cost function TC(Q) = Q2 + 4Q + 36. The market demand is Q = 1800 – 50p. What is the price at the short-run equilibrium? What is the net profit/loss of each firm at this price?arrow_forwardConsider a firm that operates in a market that competes aggressively in prices. Due to the high fixed cost of obtaining the technology associated with entering this market, only a limited number of other firms exist. Furthermore, over 70 percent of the products sold in this market are protected by patents for the next eight years. Does this industry conform to an economist’s definition of a perfectly competitive market?arrow_forward
- Suppose we have n firms in a perfectly competitive industry. The shapes of the marginal and average cost curves are as usual, i.e., they are U-shaped. The industry demand curve is downward sloping. Please answer the following questions associated with this simple model. Write down the basic assumptions of a perfectly competitive industry. We have frequently stated that these assumptions were very crucial in obtaining certain results from this model. Explain each assumption in that sense in a few sentences. Describe the industry equilibrium and corresponding long-run equilibrium of any firm in this market. For this analysis, you are supposed to draw two graphs, one for the market and one for the representative firm. If there is an increase in the demand for the product in this industry, how is the market going to be affected? What will be the effect of this change on a representative firm in the short-run? Explain possible profit opportunities in the market. As you did in part…arrow_forwarddraw marginal cost, marginal revenue, and average total cost curves for a typical perfectly competitive firm in long-run equilibrium and indicate the profit maximizing level of output and total profit for that firm.arrow_forwardConsider a competitive constant-cost industry in which each firm's marginal and average costs are given by the formulas MC = 4q and AC = 2q + 50/q, where q represents the quantity supplied by the firm. a Determine the quantity supplied by each firm in long-run equilibrium, and determine the firms' break-even price.arrow_forward
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