PRINCIPLES OF MICROECONOMICS LOOSE LEAF
12th Edition
ISBN: 9780134081083
Author: CASE
Publisher: PEARSON
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Chapter 9, Problem 3.8P
To determine
Short run and long run cost
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Suppose a firm in a perfectly competitive industry develops a manufacturing innovation that lower its variable cost of production.
What are the short run impacts of this innovation on both the firm and the industry? Please include a graph to illustrate the short run impacts.
What are the long run impacts on both the firm and industry? Please include a graph to illustrate the long run impacts.
Suppose a firm in a perfectly competitive industry develops a manufacturing innovation that lower its variable cost of production. Use words and graphs to explain the short run impacts of this innovation on both the firm and the industry.
Use words and graphs to explain the long run impacts on both the firm and industry.
Related to the Economics in Practice on page 195: If firms have long-run average cost curves with a long, flat section, larger firms have a cost advantage over smaller firms. the optimal number of firms in the industry is one. their long run supply curves are downward sloping. it is impossible to predict the size of the firm.
Chapter 9 Solutions
PRINCIPLES OF MICROECONOMICS LOOSE LEAF
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- According to the accompanying table, what quantity of output should the firm produce? Explain your answer.arrow_forwardWhat is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?arrow_forwardyou read in a business magazine that the computer firms are reaping high profits. with the theory of perfect competition in mind what do you expect to happen over time? Complete the following sentences to describe the long run adjustment.arrow_forward
- A 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_forwardGiven the following short run production cost schedule: Short Run Total Cost Function Quantity Produced Total Cost ($) 0 20 10 27 20 38 30 53 40 73 50 100 60 130 The table above gives the short run total cost function for a typical firm in a perfectly competitive industry. Please answer related questions below If the firm enjoys market power than the firm’s market price will be higher or lower than the competitive market price? Why?arrow_forwardPlease answer all parts: How does fixed cost affect marginal cost? Do fixed costs affect perfectly competitive firm’s output decisions in the short run? Briefly explain your answer. Are there fixed costs in the long run? Do fixed costs affect perfectly competitive firm’s output decisions in the long run? Explain your answers briefly.arrow_forward
- Given the following short run production cost schedule: Short Run Total Cost Function Quantity Produced Total Cost ($) 0 20 10 27 20 38 30 53 40 73 50 100 60 130 The table above gives the short run total cost function for a typical firm in a perfectly competitive industry. Please answer related questions below At what level of quantity, the marginal cost is lowest?arrow_forwardSuppose you are the production manager of a small perfectly competitive firm making a single product. Explain whether each of the following factors does or does not affect the profit maximizing level of output your perfectly competitive firm makes. Is your answer different in the short run compared to the long run. Explain. 1. Employee wages increase 2. Interest rates go down on the loans held by the firm 3. Deamnd for the firm's product increasesarrow_forwardThe following graph shows the demand curve, as well as the AVC, ATC and MC curves of a company selling rolled oats in a perfectly competitive market. Use the graph to answer the questions. The goal of the company is to maximize its profit. How many boxes of rolled oats should it sell to attain this goal? What price will it charge? How much profit does this firm make per month? Will this company produce or shut down in the short run? Why? Will this firm exit the market for rolled oats in the long run or not? Why?arrow_forward
- must a perfectly competitive industry be in the long run equilibrium if a perfectly competitive firm is in long run equilibrium? Explain and draw a graph to represent your answerarrow_forwardSuppose you are the production manager of a small perfectly competitive firm making a single product. Explain whether an increase in health insurance premiums paid by the employer does or does not affect the profit maximizing level of output your perfectly competitive firm makes. Show on graph.arrow_forwardGiven the following short run production cost schedule: Short Run Total Cost Function Quantity Produced Total Cost ($) 0 20 10 27 20 38 30 53 40 73 50 100 60 130 The table above gives the short run total cost function for a typical firm in a perfectly competitive industry. Please answer related questions below At what level of quantity, the average total cost is minimized? Show your work.arrow_forward
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