Survey Of Economics
10th Edition
ISBN: 9781337111522
Author: Tucker, Irvin B.
Publisher: Cengage,
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Illustrate and explain the shape of the Long Run Industry Supply Curve for a Decreasing Cost Industry.
Explain the fact that the short-run supply curve for a price taking firm is that segment of its marginal cost (MC) curvethat lies above the average variable cost (AVC) curve using a diagram. Show and explain clearly shut-down points and break-even points on your diagram. Explain your reasoning in detail.
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Under the assumption of perfect competition in short run firms only earn abnormal profit. True/False. Explain your answer theoretically and graphically.
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- Using diagrams derive a long-run market supply curve for 1)a constant-cost industry, 2)a decreasing-cost industry.arrow_forwardTRUE OR FALSE? A decreasing cost industry has a long run supply curve that is upward sloping.arrow_forward(c) Should a firm shut down and why if its revenue is R=$ 1, 000. Its variable cost VC=$ 500 and its sunk fixed cost is F= $ 600. Its variable cost VC=$ 1, 500 and its sunk fixed cost is F= $ 500.arrow_forward
- Explain the fact that the short-run supply curve for a price taking firm is that segment of its marginal cost (MC) curvethat lies above the average variable cost curve. Show and explain clearly shut-down and break-even points on your diagram.arrow_forwardUnder perfect competition, firms profit in the long run will be:- (1) normal profit (2) abnormal profit (3) normal losses. Searrow_forwardExplain: “The short-run rule for operating or shutting down is P > AVC, operate; P < AVC shut down. The long-run rule for continuing in business or exiting the industry is P >= ATC, continue; P < ATC, exit.”arrow_forward
- The graph attached illustrates the Demand, Marginal Revenue, Marginal Costs, Average Total Costs and Average variable Cost curves for a firm in a perfectly competitive market. What is the breakeven price? Explain your answer. What is the shot down price? Explain your answer.arrow_forwardIn a perfectly competitive market, economic profit can be positive in the long run. MR = MC because of the entry/exit adjustment process in the long-run. In the long-run, firms shut down if the market price is lower than average total cost. in the short-run, firms can stay in business when they earn negative profit.arrow_forwardQ. In a perfectly competitive industry, a. Firms earn a breakeven profit in the short-run, but can either make an economic profit or make a loss in the long-run b. None of the above c. Firms can choose whether to produce or shut-down in the short-run d. Firms always charge a price equal to the minimum of AVC in the short-run e. There are high “sunk costs” involved which act as a barrier to entry in this industryarrow_forward
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