Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 9, Problem 4QP
To determine
The effect of imposing tax.
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Suppose 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?
If firms in a perfectly competitive industry are earning losses, we would expect that in the long run
the market demand curve for the product will shift to the left causing industry output to fall.
the market supply curve for the product will shift to the left causing industry output to fall.
the market supply curve for the product will shift to the right causing industry output to rise.
the market demand curve for the product will shift to the right causing industry output to rise.
there will be no change in industry output as long as marginal revenue equals marginal cost for the individual firms.
What are the unique characteristics of a perfectly competitive market structure compared to the other market structures ?
Chapter 9 Solutions
Microeconomics
Ch. 9.1 - Prob. 1STCh. 9.1 - Prob. 2STCh. 9.1 - Prob. 3STCh. 9.1 - Prob. 4STCh. 9.2 - Prob. 1STCh. 9.2 - Prob. 2STCh. 9.2 - Prob. 3STCh. 9.2 - Prob. 4STCh. 9.3 - Prob. 1STCh. 9.3 - Prob. 2ST
Ch. 9.3 - Prob. 3STCh. 9.3 - Prob. 4STCh. 9.4 - Prob. 1STCh. 9.4 - Prob. 2STCh. 9 - Prob. 1QPCh. 9 - Prob. 2QPCh. 9 - Prob. 3QPCh. 9 - Prob. 4QPCh. 9 - Prob. 5QPCh. 9 - Prob. 6QPCh. 9 - Prob. 7QPCh. 9 - Prob. 8QPCh. 9 - Prob. 9QPCh. 9 - Prob. 10QPCh. 9 - Prob. 11QPCh. 9 - Prob. 12QPCh. 9 - Prob. 13QPCh. 9 - Prob. 14QPCh. 9 - Prob. 15QPCh. 9 - Many plumbers charge the same price for coming to...Ch. 9 - Prob. 17QPCh. 9 - Prob. 18QPCh. 9 - Prob. 1WNGCh. 9 - Prob. 2WNGCh. 9 - According to the accompanying table, what quantity...Ch. 9 - Prob. 4WNGCh. 9 - Prob. 5WNGCh. 9 - Prob. 6WNGCh. 9 - Prob. 7WNGCh. 9 - Prob. 8WNGCh. 9 - Prob. 9WNGCh. 9 - Prob. 10WNG
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- Which of the following is NOT a charactersitic of the model of perfectly competitive market? a) Many sellers produce an identical product. b) Firms can increase their prices by reducing their product. c) Firms have freedome of entry into the market. d) No signs firm can influence the market price.arrow_forwardWhich of the following is not an assumption we make about perfectly competitive markets? a)Firms are price-takers b)Firms sell identical products c)Firms earn positive profit in the short-run but zero profit in the long-run d)Firms can freely enter or exit the market in the long-run e)All of the above are valid assumptionsarrow_forwardWhy do sellers in perfectly competitive industries have no market power? choose from answers below a. There are large number of buyers and sellers. b. They all sell the same/identical goods. c. There are perfect substitutes available for the goods sold by any particular seller because they all sell identical goods. d. All of the above. e. None of the above.arrow_forward
- Suppose you are hired as an economic consultant for Promax Consulting Company. Your job is to advise the company’s clients on the appropriate action to take in the short-run in order to maximize the profits (or minimize the losses) for each firm. The firms you are about to analyze produce different products, and each operates independently in a different perfectly competitive market. You may assume that each is currently operating at an output level where marginal cost is increasing. Fill in the missing information, and make your suggestions about the appropriate action for each firm by placing one of the following symbols in the last row of the table of information that follows: C = currently operating at the correct level of output I = increase the level of output D = decrease the level of output SD = shutdown the plant Firm A…arrow_forwardWhat is the formula for profit maximization by firm ? Why does this result in the marginal cost curve becoming the same as the supply curve for firms in perfect competition? what is the difference between the short run and long run ? Why does this difference matter in our discussion of firm behavior?arrow_forwardWhich of the following industries most closely approximates the perfectly competitive model? (a) Automobile,(b) cigarette, (c) newspaper, or (d) wheat farming.arrow_forward
- Has any particular firm in the perfectly competitive market found a way to differentiate or distinguish itself from its competitors? If so, what did the firm do? If not, what prevents the firm from differentiating itself?arrow_forwardWhich of the following characteristics does NOT describe a perfectly competitive market? Group of answer choices Firms set different prices for their product, either at or above the equilibrium price. Many firms are producing identical products Companies are able to enter and exit the market without any restrictions. There are many people who desire and have the ability to purchase the product.arrow_forwardUnder conditions of perfect or pure competition, or close to those conditions, producers (firms) are what are called “price takers”. This means that the price for the product that they are selling is determined by the market. No matter how little or how much product they supply, they can sell all they want at that price. If they were to price their product higher, they will sell zero. Which of the following is true? The price is equal to marginal revenue but not average revenue The price is equal to marginal revenue and average revenue The price is equal to average revenue but is not equal to marginal revenue The price is above both marginal revenue and average revenuearrow_forward
- According to macroeconomic theory, in a perfectly competitive market a company: Group of answer choices is a cost maximizer. is a price searcher. is a price taker. is a quantity taker.arrow_forwardIs it even better for perfectly competitive firms to produce output even though it is losing money? If so, when?arrow_forwardAccording to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?arrow_forward
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