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A: Answer
Explain why the alternative of the industry supply curve based on constant returns is not
viable for Marshall’s theory of value.
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- Consider a competitive constant-cost industry in which each firm's marginal and average costs are given by the formulas MC = 4q and AC = 2q + 50/q, where q represents the quantity supplied by the firm. i) Determine the quantity supplied by each firm in long-run equilibrium, and determine the firms' break-even price.Answer both parts a and b please. Part a) True or False: In a competetive market, a firm's short run supply curve is sloping upwards due to diminishing returns of the variable input. Explain why. Part b) Are long run supply curves always upward sloping? Explain why or why not with a graph.A Jakarta City cab operator appears to be making positive profits in the long run after carefully accounting for the operating and labor costs. Does this violate the competitive model? Why or why not?
- The following figures depict the market supply and demand curves for a constant cost, competitive industry (left) and the per unit cost curves for a typical firm (right). For parts (a) and (c), below, you can again include your answers directly on the graph. A) Identify the short-run equilibrium in this market, indicating the price, aggregate quantity and the amount supplied by an individual firm. b) Explain why it is not a long-run equilibrium. c) Explain how the market would adjust to an equilibrium in the long-runUse the following statements to answer this question: 1) The firm’s decision to produce zero output when the price is less than the average variable cost of production is known as the shutdown rule 2)The firm’s supply decision is to generate zero output for all prices below the minimum AVC. A) 1 and 2 are true b)1 is true and 2 is false c)2 is true and 1 is false d) 1 and 2 are false7. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. COSTS (Dollars per ton) 100 90 80 70 60 50 40 ATC 30 20 10 + MC AVC 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY OF OUTPUT (Thousands of tons) The following diagram shows the market demand for steel. ⑦? Use the orange points (square symbol) to plot the short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to plot the short-run industry…
- Q2: Derive theoretically and graphically the supply curve of an industry.6. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. (? 100 90 80 70 60 50 ATC 30 20 AVC 10 MC O 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of tons) COSTS (Dollars per ton) 8Assume that the market determined price is $10 in a perfectly competitive industry. A firm is currently producing 100 units of output. Average total cost is $8 while marginal cost is $8 and average variable cost is $6. Is the firm producing the profit-maximizing level of output? Why or why not? If not, what should the firm do?
- The market determined price in a perfectly competitive industry is P = Rs. 10. Suppose that the total cost equation of an individual firm in the industry is given by the expressionTC 1000+2Q+0.01Q2 What is the firm’s profit-maximizing output level and profit? Is this profit normal profit or supper normal profit? Justify your answerConsider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms.Multiplying one firm’s short-run supply function to the number of firms in a specified industry will give you the short-run market supply function. True or false.
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