Unit 10 - Competition - MicroeconomicsThe market for coffee near Sarbucks stores is perfectly competitive (all firms are price takers). Graph the long-run market equilibrium for coffee and for Sarbucks as an individual firm in this market in spaces below. Make sure to identify the market S&D, firm S&D, and firm ATC and AVC curves. How much profit is the firm making? Discuss with your group why this profit is synonymous with being in a long-run equilibrium. Now suppose that coffee shop coffee is a normal good and income goes up. Starting from the diagram in (1), show and discuss with your group how the market will adjust towards a short-run equilibrium and then return to a long-run equilibrium. What happen to the market price and quantity in the short-run? What happens to individual firm output and the number of firms in the short-run? What is the profit in the short-run? What happen to the market price and quantity in the long-run? What happens to individual firm output and the number of firms in the long-run? What is the profit in the long-run? Now suppose that an FDA report announces that coffee is harmful to cardiovascular health. Starting from the diagram in (1), show and discuss with your group how the market will adjust towards a short-run equilibrium and then return to a long-run equilibrium. What happen to the market price and quantity in the short-run? What happens to individual firm output and the number of firms in the short-run? What is the profit in the short-run? What happen to the market price and quantity in the long-run? What happens to individual firm output and the number of firms in the long-run? What is the profit in the long-run?How will the FDA report impact the perfectly competitive market for tea, a coffee substitute, in the short-run and long-run? Talk this through with your group? Market for coffee shop coffeeSarbucks store Market for coffee shop coffeeSarbucks store

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Unit 10 - Competition - Microeconomics

The market for coffee near Sarbucks stores is perfectly competitive (all firms are price takers). Graph the long-run market equilibrium for coffee and for Sarbucks as an individual firm in this market in spaces below. Make sure to identify the market S&D, firm S&D, and firm ATC and AVC curves. How much profit is the firm making? Discuss with your group why this profit is synonymous with being in a long-run equilibrium.

Now suppose that coffee shop coffee is a normal good and income goes up. Starting from the diagram in (1), show and discuss with your group how the market will adjust towards a short-run equilibrium and then return to a long-run equilibrium. What happen to the market price and quantity in the short-run? What happens to individual firm output and the number of firms in the short-run? What is the profit in the short-run? What happen to the market price and quantity in the long-run? What happens to individual firm output and the number of firms in the long-run? What is the profit in the long-run?

Now suppose that an FDA report announces that coffee is harmful to cardiovascular health. Starting from the diagram in (1), show and discuss with your group how the market will adjust towards a short-run equilibrium and then return to a long-run equilibrium. What happen to the market price and quantity in the short-run? What happens to individual firm output and the number of firms in the short-run? What is the profit in the short-run? What happen to the market price and quantity in the long-run? What happens to individual firm output and the number of firms in the long-run? What is the profit in the long-run?

How will the FDA report impact the perfectly competitive market for tea, a coffee substitute, in the short-run and long-run? Talk this through with your group?

Market for coffee shop coffee
Sarbucks store

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