Microeconomics For Today (MindTap Course List)
9th Edition
ISBN: 9781305507111
Author: Irvin B. Tucker
Publisher: Cengage Learning
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Chapter 8, Problem 17SQ
To determine
Conditions of a
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Suppose the shirts industry is perfectly competitive and begins in a long-run equilibrium.
(a) Pluto Company invents a new production process that reduces the production cost. What happens to Pluto Company’s profits and the price of shirts in the short run when Pluto Company’s patent prevents other firms from using the new technology?
(b) What happens in the long run when the patent expires and other firms are free to use the technology?
Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.)
Total revenue is $120,000,
Total fixed costs are $100,000
Total variable costs are $110,000
Marginal cost is $200/unit
Quantity produced is 600 units
What will you suggest to Juan?
A: Shut down immediately
B: Do not shut down and increase production
C: Do not shut down but decrease production
D: Do not shut down and do not change the current production level.
Would a firm earning zero economic profit continue to produce, even in the long run?
In long-run competitive equilibrium, a firm earning zero economic profit
A. will not continue to produce because this return is not covering its opportunity costs.
B. will not continue to produce because it would be better off shutting down.
C. will not continue to produce because such profit corresponds with negative accounting profit.
D. will continue to produce because such profit is as high a return as could be earned elsewhere.
E. will not continue to produce because it could earn a better return in another industry.
Chapter 8 Solutions
Microeconomics For Today (MindTap Course List)
Ch. 8.5 - Prob. 1YTECh. 8.5 - Prob. 2YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQP
Ch. 8 - Prob. 9SQPCh. 8 - Prob. 10SQPCh. 8 - Prob. 11SQPCh. 8 - Prob. 12SQPCh. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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- Please answer the following question:arrow_forwardIn 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?arrow_forwardFirms in an industry have the following cost function: C(q)=3q3-6q2+4q. If the market is perfectly competitive, what do we expect the price to be in the long run? Select one: a. 2 b. 3 c. 1 d. 8arrow_forward
- A firm produces a product in a perfectly competitive industry and has a total cost function TC= 50+4q+2q². a. At the short-run market price of $20, the firm is producing 5 units of output. Is the firm maximizing its profit? Explain. b. What quantity of output will the firm produce in the long run, assuming there is no change in cost structure? What will be the long-run equilibrium price? c. Graphically depict the long-run equilibrium for an individual firm within this market.arrow_forwardIn a perfectly competitive market, each firm has the cost function: q 2+10q+100. The price in the market is $50. a. What is the Marginal Cost for the firm? b. What is the Profit Maximizing Output? c. What is the Total Profit the firm receives? d. Should this firm continue to produce in the short run? Please explain. e. If the price is $20, should the firm continue to produce? Please explain.arrow_forwardIn the short run, a perfectly competitive firm should continue to produce as long as it can cover its variable costs. Which of the following conditions describes this rule? OP> MR OP> AFC O ATC > AVC OP> AVCarrow_forward
- In a perfectly competitive market. A company launches a new technology that gives the company considerably lower average costs than other competitors. What are the effects on price, output and profits in the short and long run?arrow_forwardIn a perfectly competitive market, please compare the short run and long run prices in an increasing cost industry. Are they same? If yes, what drives the equal prices? If not, what is the main reason of that difference?arrow_forwardA market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers? Include a detailed set of graphs showing both the market and firm long run equilibration in reaction to the change.arrow_forward
- Just a student stuck on this Economic question for awhile. Question in image. I appreciate you helping me learn :)arrow_forwardShort-Run Outcomesarrow_forwarda) Describe the factors that drive profits to zero in perfectly competitive markets in the long run. Explain carefully the incentives that drive the market to a long run equilibrium. b) Why would a firm choose to operate at a loss in the short run? Explain carefully. c) When do firms decide to shut down production in the short run? Explain carefully.arrow_forward
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