7. Suppose that the inverse market demand for pumpkins isgiven by P = $10-0.050. Pumpkins can be grown by any-one at a constant marginal cost of $1.ena.If there are lots of pumpkin growers in town so that thepumpkin industry is competitive, how many pumpkinswill be sold, and what price will they sell for?b. Suppose that a freak weather event wipes out thepumpkins of all but two producers, Linus and Lucy.Mesob 017050 Both Linus and Lucy produced bumper crops and havemore than enough pumpkins available to satisfy thedemand at even a zero price. If Linus and Lucy colludeto generate monopoly profits, how many pumpkinswill they sell, and what price will they sell for?c. Suppose that the predominant form of competition inthe pumpkin industry is price competition. In otherwords, suppose that Linus and Lucy are Bertrand com-900 petitors. What will be the final price of pumpkins inthis market- in other words, what is the Bertrandequilibrium price?--700d. At the Bertrand equilibrium price, what will be thefinal quantity of pumpkins sold by both Linus andLucy individually, and for the industry as a whole?How profitable will Linus and Lucy be?Pingooe. Would the results you found in parts (c) and (d) bebuslikely to hold if Linus let it be known that his pumpkinswere the most orange in town, and Lucy let it be knownthat hers were the tastiest? Explain.f. Would the results you found in parts (c) and (d) holdif Linus could grow pumpkins at a marginal costto of $0.95?in a small

In economics, a competitive equilibrium refers to a state of balance in a market where the quantity…

7. Suppose that the inverse market demand for pumpkins is given by P= $10-0.050. Pumpkins can be grown by any- one at a constant marginal cost of $1. a. If there are lots of pumpkin growers in town so that the pumpkin industry is competitive, how many pumpkins will be sold, and what price will they sell for? b. Suppose that a freak weather event wipes out the pumpkins of all but two producers, Linus and Lucy.

7. Suppose that the inverse market demand for pumpkins is given by P= $10-0.050. Pumpkins can be grown by any- one at a constant marginal cost of $1. a. If there are lots of pumpkin growers in town so that the pumpkin industry is competitive, how many pumpkins will be sold, and what price will they sell for? b. Suppose that a freak weather event wipes out the pumpkins of all but two producers, Linus and Lucy.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 1SCQ: Firms ill a perfectly competitive market are said to be price takers that is, once the market...

See similar textbooks

Similar questions

Suppose a farmer earns a larger profit than the "normal profit" by producing a special type of vegetable that becomes popular O other farmers arc likely to plant the same vegetable, pushing up the prevailing market price. O the firm will continue to carn its 'normal profits" far into tho future. O the farm's owners are likely to withdraw from the industry in order to retire carly. other farmers are likely to plant the same vegotablo, pushing down the prevailing market price.
*Suppose that the development of a new droughtresistanthybrid seed corn leads to a 50 percent increase in the averageyield per acre without increasing the cost to the farmers who usethe new technology. If the producers in the corn production industrywere price takers, what would happen to the following?a. the price of cornb. the profitability of corn farmers who quickly adopt thenew technologyc. the profitability of corn farmers who are slow to adopt thenew technologyd. the price of soybeans, a substitute product for corn
Many small boats are made of fiberglass and a resinderived from crude oil. Suppose that the price of oilrises.a. Using diagrams, show what happens to the costcurves of an individual boat-making firm and tothe market supply curve.b. What happens to the profits of boat makers in theshort run? What happens to the number of boatmakers in the long run?
Please don't give wrong answees
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?
Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as the incumbent tries to bleak into the market by selling 4,000 units of output. Estimate from the graph what the new firms average cost of producing output would be. If the incumbent continues. to produce 6,000 units, how much output would the two films supply to the market? Estimate what would happen to the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately how much profit would each firm earn? Figure 9.2 Economics of Scale and Natural Monoploy
May and Raj me the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the com. If they work independently, they will each earn 100. If they decide to work together and both lower their output, they call each earn 150. If one person lowers output and the other does not, the person who lowers output will earn $1 and the other person will capture the entire market and will earn 200. Table 10.6 represents the choices available to Mary and Raj. What is the best choice for Raj if he is sole that Mary will cooperate? If Mary thinks Raj will cheat, what should Mary do and why? What is the prisoners dilemma result? What is the preferred choice if they could ensure cooperation? A = Work independently; B = Cooperate and Lower Output. (Each results entry lists Rajs earnings first, and Marys earnings second.)
Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, What is the right amount of variety? Can there be too many varieties of shoes, for example?
The demand for cigarettes is given by Figure 1 P= 550 - 0.2Q. Cigarettes are manufactured at a constant marginal cost of 50 and sold in a competitive Price 650, 600 market. 550 What is the quantity of cigarettes sold in equilibrium? 500 450- OPrivate =U 400- 350- 300 250 200- 150 100- 50- 0- 400 800 1200 1600 2000 2400 28o0 3200 Output
Omari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Omari initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Omari's HookNLadder. As the graph shows, in order to sell the additional fire truck, Omari must lower the price from $160,000 to $120,000 per truck. Notice that Omari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $120,000 rather than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $120,000. PRICE (Thousands of dollars per fire engine) ARBS228882R 200 140 2 Demand 5 QUANTITY (Fire engines) $…
Suppose that the market for polos is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. Esc 50 PRICE (Dollars per polo) 78°F Sunny 45 40 F1 35 30 25 20 15 10 5 0 + 0 + 2 F2 MC -0- + 4 ATC AVC 6 8 10 12 14 QUANTITY (Thousands of polos) F3 0+ F4 69 16 18 F5 20 a F6 i I F7 4- F8 Q+ H F9 F10 FO F11 F12 Fn Lock Ins
A publisher faces the following demand schedule for the next novel from one of itspopular authors:Price Quantity Demanded$ 100 0 novels90 100,00080 200,00070 300,00060 400,00050 500,00040 600,00030 700,00020 800,00010 900,0000 1,000,000The author is paid $2 million to write the book, and the marginal cost of publishingthe book is a constant $10 per book.a. Compute total revenue, total cost, and profit at each quantity. What quantity woulda profit-maximizing publisher choose? What price would it charge?b. Compute marginal revenue. (Recall that MR = ΔTR/ΔQ.) How does marginal revenuecompare to the price? Explain.C. Graph the marginal-revenue, marginal-cost, and demand curves. At what quantitydo the marginal-revenue and marginal-cost curves cross? What does this signify?d. In your graph, shade in the deadweight loss. Explain in words what this means e. If the author were paid $3 million instead of $2 million to write the book, how wouldthis affect the publisher’s decision regarding what…