31. In a competitive industry:A) all firms will earn above-normal profits if demand is high.B) the opportunity cost of production is zero.C) profits are only attainable in the long run to those firms able to innovate at the lowest costD) resources move across firms in such a way that the total value of production is maximized.

Detailed explanation:Under perfect competition, there are many buyers and sellers, and prices…

Answered: 31. In a competitive industry: A) all…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Explain how the long run differs from the short run in pure competition. 2. The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods? Explain.
(a) What is meant by zero economic profit?(b) What are the conditions that need to be satisfied for a long-run competitive equilibrium?
1. A) What are the underlying assumptions associated with Perfect Competition? B) Explain why firms operating under Perfect Competition make normal economic profit in the long-run. C) Explain why Perfect Competition results in Allocative Efficiency. D)Explain why Perfect Competition results in Economic Efficiency.
1) Referring to Figure, at price $80, what is the profit-maximizing output in the short run? 2) Refer to Figure. As the competitive industry, not just the firm in question, moves toward long-run equilibrium, the firm will be forced to operate at what level of output?
26.A firm operates in a perfectly competitive market and is producing at the profit-maximizing output. It is incurring economic losses. Based on this information, which of the following is true? A-Average total cost = price; marginal cost > marginal revenue. B-Average total cost = price; marginal cost = marginal revenue C-Average total cost > price; marginal cost = marginal revenue D-Average total cost > price; marginal cost > marginal revenue E-Average total cost < price; marginal cost > marginal revenue 27.In the short run, a price-taking firm decides to produce zero units of output. Which of the following must have been the case? A-The market price was less than the firm's average variable cost. B-The firm was earning normal profits in the short run but projected economic losses in the long run. C-The firm's average total cost was higher than its average revenue. D-The market price was between the firm's average variable cost and average total cost. E-The…
4) Explain why a firm should continue to operate in the short run so long as market price is greater the firm's average variable cost at the profit-maximizing level of output.
a. What is its profit?b. What is its marginal cost?c. What is its average variable cost?d. Is the efficient scale of the firm more than, less than, or exactly 100 units? use this to solve A profit-maximizing firm in a competitive market is currently producing 100 units of output. It has average revenue of $10, average total cost of $8, and fixed costs of $200.
Which of the following statements is TRUE? Select one: a. If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing at a level of output where price is greater than average total cost. Ob. The presence of positive economic profit in a perfectly competitive market is consistent with the characteristics of a long-run competitive equilibrium. c. When firms in a perfectly competitive market incur economic losses, some will exit in the long run, thereby shifting the industry supply curve rightward. Od. If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing at a level of output where price is greater than average total cost.
3. Consider the perfectly competitive markets for bottled water in two cities, A and B. Both have a downward-sloping demand curve and upward-sloping supply curve, and each market is currently in long run equilibrium at the same price. The demand curves are similar, but in city A the supply curve is more price elastic than in city B. a) There's a shock: an accident causes the tap water in the area to become undrinkable. In two diagrams, one for each city, compare the effect on price and quantity traded in the two cities, assuming that a new equilibrium is reached. Explain your diagrams. b) Following on from your answer to a), explain what would happen in the model to the number of suppliers and their profitability, in each of the short run and the long run.
17. A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. a. Describe what happens to the profit-maximizing output quantity for individual firms as the market leaves and then returns to long-run equilibrium. b. Describe what happens to the market quantity as the market leaves and then returns to long-run equilibrium.
1.What is the primary mechanism that allows perfectly competitive markets to reach long-run equilibrium? Changes in the price of substitutes and complements Firms freely enter or exit the market when it is in their interest to do so Changes in consumer tastes Changes in production technology 2. Which of the following is true? Marginal cost curves are always downward sloping. A monopolist can set their price as high as they want without decreasing their sales. Firms have no fixed costs in the long run. A monopoly is a market in which many competitors sell identical goods. 3. Firms in monopolistic competition can increase demand for their product through effective advertising. Why might these firms choose not to invest in additional advertising? Advertising is almost never effective for firms in monopolistic competition. They don’t feel like it. Advertisements increase firm costs, and the increase in demand may not justify these costs. Advertising…
Suppose the shirts industry is perfectly competitive and begins in a long-run equilibrium. (a) Pluto Company invents a new production process that reduces the production cost. What happens to Pluto Company’s profits and the price of shirts in the short run when Pluto Company’s patent prevents other firms from using the new technology? (b) What happens in the long run when the patent expires and other firms are free to use the technology?

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