ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 8, Problem 4.7PA
To determine
Complete the table and answer the subparts.
Introduction: Not required.
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3 examples of perfectly competitive markets and does these firms profit in long run or short run
1
Hypothetical Case 1
The following equations describe the long-run situation for prices and costs, where the numbers indicate the amounts of labor and capital needed to produce a unit of
wheat and cloth. W is the wage rate/hour and R is the rental rate/hour.
Price of wheat = 1 W + 2 R
Price of cloth = 2 W + 1 R
In autarky, the price of wheat is 5 and the price of cloth is 4. As trade opens up wheat price rises from 5 to 6. Cloth price remains at 4.
Consider Hypothetical Case 1 above. After trade opens up, how many units of wheat can a worker buy with one hour of labor?
Question 1
When do firms decide to shut down production in the short run? Explain it.
How is the short-run average cost curve and the long-run average cost curve-shaped? What is the difference between them?
Chapter 8 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
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Similar questions
- 28.The following information is available for a company that operates in a perfectly competitive market. Current Output 5000 units Current Market Price $5 Total Cost $25,000 Marginal Cost $4 Total Variable Cost $20,000 What is the best action for this firm? A-Increase output in the short run and stay in the market the long run. B-Increase output in the short run and decrease output in the long run C-Shut down in the short run and exit in the long run D-Shut down in the short run and produce in the long run E-Reduce output in the short run and increase output in the long run 29.Which of the following statements is true of a perfectly competitive market in the long run? A-No firms can enter or exit. B-All firms earn normal profits, and there is both productive and allocative efficiency. C-Individual firms produce where average variable cost equals marginal cost and marginal revenue. D-It is allocatively efficient but may or may not be productively…arrow_forwardQuestion 4 a. The following presents the costs and revenues for a firm. Calculate the marginal cost, marginal revenue and profit for each unit of production. How many units should the firm produce to maximise profit? b. Describe the relationship between the marginal product and the total product of a firm?arrow_forwardWhy is it important for managers to understand the mechanics of supply and demand both in the short run and the long run? Give examples of companies whose business was either helped or hurt by changes in supply or demand in the market in which they are competing.arrow_forward
- 2. Given the following data about an organization works in the short run: Q TFC TVC TC AFC AVC ATC MC 0 1 44 2 48.5 3 96 4 50 5 310 6 Complete the tablearrow_forward15. Explain the following quotations; 1. " Greater production is not tantamount to greater profit"2. "Higher selling price does not equate to higher profit"!arrow_forward(a) Suppose initially there is a long run equilibrium in a perfeetly competitive market. If suddenly there is a negative demand shock in the market, how the market will adjust to a new long-run equilibrium? Provide adequate graph to supplement your answer.arrow_forward
- Legendary for his business and investment acumen, Warren Buffett is frequently called the “Oracle of Omaha” after his birthplace in Omaha, Nebraska. As one of the world’s wealthiest business owner-investors, business executives are always interested in any insight or opinion Mr. Buffett might wish to share. Explain each one of the following statements made by Warren Buffett. (Quotations from The Wall Street Journal, September 23, 2002.) “You cannot be the high-cost producer in a commodity business.”“Sometimes it’s not even any good to be the low-cost producer.”arrow_forward24.Use the graph to answer the question Where on the graph would firms be experiencing diseconomies of scale? A-Between A and B. B-Point B. C-Between B and C. D-Between C and D E-Beyond D 25.A firm has a total revenue of $90,000. Its total explicit costs are $50,000, and its total implicit costs are $40,000. What economic profit is the firm earning? A-$50,000. B-$40,000. C-$10,000. D-Indeterminate. E-Normalarrow_forwardTable 11.4 Number of Workers Total Product Product Price ($) 0 0 4 1 15 4 2 29 4 3 42 4 4 54 4 5 65 4 6 75 4 7 84 4 8 92 4 9 99 4 10 105 4 Refer to Table 11.4 for the data for a perfectly competitive firm. The first column shows the number of workers employed in production, the second column shows the total product of the firm, and the third column shows its product price. From the data in the table, it can be said that the marginal revenue product begins to decline with the second worker hired. Group of answer choices False Truearrow_forward
- 1. Give an example of how the profits change from the short run to the long run for a firm in a perfectly competitive market. 2. What are the similarities and differences between a short-run supply curve and a short-run market supply curve?arrow_forwardIn the short run, firms will 1. (earn economic profits, suffer economic losses). In the long run, the supply curve will 2. (shift rightward, shift leftward, remain unchanged) Comparing the two long-run equilibria on the graph, you can see that the milk market is an example of 3. (a decreasing-cost industry, an increasing-cost industry, a low-cost industry, a high-cost industry)arrow_forward
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