If a new surf shop, Mike's Surf Shop, opens, then O the market supply curve for surf gear will shift to the right. O the market supply curve for surf gear will shift to the left. O there will be a movement up the market supply curve for surf gear. O there will be a movement down the market supply curve for surf gear.
If a new surf shop, Mike's Surf Shop, opens, then O the market supply curve for surf gear will shift to the right. O the market supply curve for surf gear will shift to the left. O there will be a movement up the market supply curve for surf gear. O there will be a movement down the market supply curve for surf gear.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The image presents a multiple-choice question about market supply curves, which is commonly discussed in economics.
**Question:**
If a new surf shop, Mike’s Surf Shop, opens, then:
- ○ the market supply curve for surf gear will shift to the right.
- ○ the market supply curve for surf gear will shift to the left.
- ○ there will be a movement up the market supply curve for surf gear.
- ○ there will be a movement down the market supply curve for surf gear.
**Explanation of Concepts:**
1. **Market Supply Curve Shift to the Right:**
- This indicates an increase in supply. If new suppliers, like Mike's Surf Shop, enter the market, the total supply of surf gear increases, causing a rightward shift.
2. **Market Supply Curve Shift to the Left:**
- This represents a decrease in supply. The market supply curve shifts to the left when the market experiences fewer suppliers or higher production costs, which is not applicable if a new shop opens.
3. **Movement Up the Supply Curve:**
- Implies a change in price leading to a change in quantity supplied. This movement typically results from changes in demand or price fluctuations, not from new suppliers entering the market.
4. **Movement Down the Supply Curve:**
- Similar to the movement up, this indicates a change due to price, not supply-side alterations through additional shops.
Thus, a new shop indicates that the supply curve shifts to the right, due to increased supply in the market.
Expert Solution
Step 1: Define perfect competition
In perfect competition,
There exists a large number of buyers and sellers.
The firm will produce where the price is equal to the marginal cost.
The profit is when the price is greater than the ATC, i.e., when the demand curve lies above the ATC.
The firm will produce in the short run when it is able to cover its variable cost.
In the long run, Each firm earns zero economic profit.
This means, In the long run, price = ATC.
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