Principles of Economics Plus MyLab Economics with Pearson eText (2-semester access) -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134426846
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 9, Problem 3.7P
To determine
Long run incentives for the firm.
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Students have asked these similar questions
If the average output per worker in a firm is 7 units per hour, then the average output will rise as a result of hiring another worker if *
the marginal worker produces 7 units.
more workers are hired.
the marginal output of the next worker exceeds 7.
the last worker produced less than 7 units.
The long-run ATC curve of a competitive firm derives its shape from: *
decreasing, then increasing, short-run returns.
increasing, then decreasing, short-run returns.
economies, then diseconomies, of scale.
diseconomies, then economies, of scale.
Which of the following represents a long-run decision for the firm?
a. rehiring workers who were previously laid off.
b. determining what price to charge for a given level of output.
c. deciding how much output to supply to the market at the current market price.
d. building another wing on the plant in order to add a new assembly line.
answer. (d. building another wing on the plant in order to add a new assembly line.)
Please help me explain this questions. Thanks in advance
If a competitive industry is incurring normal profits, output will
stay the same as there is no incentive to expand.
expand as resources move toward the industry.
contract as resources move away from industry.
expand as resources move away from industry.
Chapter 9 Solutions
Principles of Economics Plus MyLab Economics with Pearson eText (2-semester access) -- Access Card Package (12th Edition)
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Similar questions
- If a purely competitive firm is facing a situation where the price of its product is lower than the average cost, then all of the following apply, except Multiple Choice A) the firm is suffering losses, and if things are not expected to improve, the firm will leave the industry. B) the firm may be earning some accounting profits, but less than what it could earn elsewhere. C) other firms will want to enter the industry because of the positive economic profits. D) the firm may earn economic profits in the long run if it expands its plant in order to exploit economies of scale.arrow_forwardBecause industry X is characterized by perfect competition, every firm is earning zero economic profit. If the product price falls, no firm can survive. Do you agree or disagree.arrow_forwardSuppose all firms in a perfectly competitive market structure are in long-runequilibrium. Then demand for the firms’ product increases. Initially, price andeconomic profits rise. Soon afterward, the government decides to tax most (but not all) of the economic profits, arguing that the firms in the industry did not earn the profits. Rather, the profits were simply the result of an increase in demand. What effect, if any, will the tax have on market adjustment?arrow_forward
- Why is the perfect competition often used as a benchmark? Question 3 options: The perfect competition model is more frequently observed in the real world compared to other market models It provides a useful comparison to markets that operate in more complex, real-world conditions. It accounts for a variety of issues like pollution, inventions of new technology, poverty, and government programs that other models do not account for. In the real world, all markets are perfectly competitive, so this model allows us to compare them to one another.arrow_forwardState whether the following statements are correct or not and briefly explain why A. Diseconomies of scale justify horizontal expansion of firms into unrelated fields. B. Economies of scale lead to a downward sloping marginal cost curve C. Elasticity of demand remains constant throughout the product cycle.arrow_forwardWhich of the following statements can be drawn from this diagram? a. Point C represents a lower level of profit in comparison to Point B. b. The firm exhibits diseconomies of scale if it produces more than 10 units. c. The firm makes zero economic profit if it can sell 20 units and charge 20. d. The firm maximises its profit by producing 20 units.arrow_forward
- The cost function for a firm is given by C(Q) = 5+q^2. If the firm sells output in a perfectly competitive market and other firms in the industry sell output at a price of $20, what price should the manager of this firm put on the product? What level of output should be produced to maximize profits? How much profit will be earned?arrow_forwardIn the short run, TVC *is positive when output is zero.increases with increasing output.decreases when the firm is experiencing diminishing returns.decreases when the firm is experiencing increasing returns. The MC curve must be *rising when TC is rising.less than AFC when the average cost is rising.greater than ATC when the average curve is rising.falling when the ATC curve lies below the marginal curve. Which of the following statements is correct? *In order to maximize profits in the short run, a purely competitive firm should produce at the level where marginal cost is equal to price.A purely competitive firm will produce in the short run, so long as total receipts are sufficient to cover its total fixed costs. 2A purely competitive firm will always close down in the short run, whenever price is less than average total cost.In the long-run, firms incur costs that are fixed and variable.arrow_forwardThe _____ assumption of the perfectly competitive model ensures that a firm's long-run level of output will be at the minimum of average total cost. Question 2 options: symmetric information many small producers free entry and exit price-taking differentiated productarrow_forward
- What would change if you found a new niche market to sell your product and your sales jumped to $200,000 and your input costs went up to $30,000? What is your accounting profit? Economic profit? Should you stay in business? Would other firms enter into the market? please show work!arrow_forwardThen, plot points along the portion of the firm's short-run supply curve that corresponds to prices where there is positive output.arrow_forwardState any four assumptions of the factor prices under the perfect competition?arrow_forward
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