ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
4th Edition
ISBN: 9781285423548
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 8, Problem 6.11PA
A
To determine
Short run adjustments for markets and the firm to a decrease in consumer incomes are to be illustrated graphically.
Concept Introduction :
B
To determine
Long run adjustments to the drop in income are to be shown graphically.
Concept Introduction : Perfectly competitive firms are the ones with many firms producing same product in the market at a homogenous prices. The entry and exit in competitive market is free , the firms always face competition due to high substitutability of the products. Under perfect competition , long run equilibrium is when all factors of production are variable , new firms entering the market supply of firm’s increases reducing price per product. They need to ensure p> AVC to stay in the market so the loss making firm exit. Thus, firms enjoy market efficiency P=MR.
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Students have asked these similar questions
27- Under perfect competition, entry of new firms into the market in the long run tends to:
Select one: a. raise the level of profit of the existing firms.
b. reduce the market power of the existing firms.
c. raise the aggregate supply. d. raise the aggregate demand for goods.
e. reduce the degree of competitiveness in the market.
With neat explanation
Question 1. What impact do falling input prices have on a market’s long-run supply curve?
a. Falling input prices push the market supply curve to the left.
b. Falling input prices push the market supply curve to the right.
c. Falling input prices do not impact the market supply curve.
Question 2. How can market prices fall when both the demand and supply for a good or service increase?
a. Market demand would have to increase greater than market supply.
b. Market supply would have to increase greater than market demand.
c. Market demand and supply would have to increase by the same amount.
d. None of the above.
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…
Chapter 8 Solutions
ECON: MICRO4 (New, Engaging Titles from 4LTR Press)
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