AS slopes upward because as the Price Level for outputsinputs remainingwith the price ofthe costs of production are not rising and, all else equal,production.the lure of higher profits will induce firms tofalls; fixed; decreaseOrises; fixed; expandremains constant; constant; expandNone of the above

Curve of Aggregate Supply and Prices:Because businesses perceive a chance to increase profits as the…

Answered: AS slopes upward because as the Price…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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Similar questions

What is the relationship between marginal product and marginal cost? (Hint: Look at the curves.) Why do you suppose that is? Is this relationship the same in the long run as in the short run?
A firms marginal cost curve above the average variable cost curve is equal to the films individual supply curve. This means that every time a firm receives a price from the market it will be willing to supply the amount of output where the price equals marginal cost. What happens to the films individual supply curve if marginal costs increase?
Automobile manufacturing is an industry subject to significant economies of scale. Suppose there are four domestic auto manufacturers, but the demand for domestic autos is no more than 2.5 times the quantity produced at the bottom of the long-run average cost curve. What do you expect will happen to the domestic auto industry in the long run?
Wonopoly and natural resource prices Suppose that a firm is the sole owner of a stock of a natural resource. a. How should the analysis of the maximization of the discounted profits from selling this resource (Equation 17.63 be modified to take this fact into account? b. Suppose that the demand for the resource in question had a constant elasticity form q(t)=a[p(t)]b . How would this change the price dynamics shown in Equation 17.67? c. How would the answer to Problem 17.7 be changed if the entire crude oil supply were owned by a single firm?
The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomacs closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomacs oven and the competitive Spring City model? Would you say that these two firms are very dose competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is 3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?
Return to Figure 7.7. What is the marginal gain in output from increasing the number of batters from 4 to 5 and from 5 to 6? Does it continue the pattern of diminishing marginal returns? Figure 7.7 How output Affects Total costs
What is the difference between economies of scale, constant returns to scale, and diseconomies of scale?
Do you think that the taxicab industry in large cities would be subject to significant economies of scale? Why or why not?
How does fixed cost affect marginal cost? Why is this relationship important?
What is die difference between accounting and economic profit?
A computer company produces affordable, easy-to-use home computer systems and has fixed costs of 250. The marginal cost of producing computers is 700 for the first computer, 250 for the second, 300 for the third, 350 for the fourth, 430 for the fifth, 450 for the sixth, and 500 for the seventh. Create a table that shows the companys output, total cost, marginal cost, average cost, variable cost, and average variable cost. At what price is the zero-profit point? At what price is the shutdown point? If the company sells the computers for 500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss. If the firm sells the computers for 300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVG curves to illustrate your answer and show the profit or loss.
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

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