Q6 (3 Points): Would a firm earning zero economic profit continue to produce (Perfectlycompetitive market), even in the long run?In long-run competitive equilibrium, a firm earning zero economic profita- will continue to produce because suchprofit's as high a return as could be earned elsewhere.b- will not continue to produce because it could earn a better return in another industry.c- will not continue to produce because this return is not covering its opportunity costs.d- will not continue to produce because it would be better off shutting down.e-will not continue to produce because such profit corresponds with negative accountingprofit.

> Option a: This is the correct option. In long-run competitive equilibrium, a firm earning zero…

Answered: Q6 (3 Points): Would a firm earning…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1) On a graph for a representative firm in a perfectly competitive industry, depict the three cost curves AVC, ATC, and MC (assume typical U-shaped cost curves). Now assume the market price, P, is such that it intersects the upward-sloping portion of MC above ATC. Graphically depict the short-run equilibrium q (representative firm's output) and π (representative firm's profit) under this price scenario. 2) Given the situation you graphically depicted in #1, please state the level of economic profits (positive, zero, negative) of this representative firm and explain why this is the case.
Answer multiple choice
6. Suppose that there are two identical firms in the silver mining industry. The cost curve of each firm is C(Q) = 0.25Q². Quantity (Q) is measured in troy ounces per day. Demand per day for silver is QD = 408 - 8P where price (P) is measured in dollars per troy ounce. a) If the two firms are price takers, then what are the supply curves of each firm? What is the industry supply curve? b) If the two firms behave as price takers, then what will be the price and quantity that clear the market? d) c) If the firms formed a cartel, then what would be the marginal cost of the cartel? If the cartel is a monopolist, then what price will the cartel charge for silver? What quantity will it sell? Illustrate the demand, marginal revenue and marginal cost curves in a diagram. Assume that the firms in the cartel divide the production and the profits equally. e) What are the profits of an individual firm in the cartel? f) Suppose that firm 1 “cheats" on the cartel by producing 2 more ounces than its…
Assume that a perfectly competitive, constant-cost industry is in a long-run equilibrium with 40 firms. Each firm produces 90 units of output, which it sells at the price of $39 per unit; out of this amount, each firm pays $3 tax per unit of the output. The government decides to decrease the tax so that the firms will be paying $1 tax per unit. a) Explain what would happen in the short run to the equilibrium price and industry output, number of firms in the industry, output and profit of each firm. Illustrate on graphs for the market and a particular firm. b) Explain what would happen in the long run to the equilibrium price and industry output, number of firms in the industry, output and profit of each firm. Illustrate on graphs for the market and a particular firm. Compare this new long-run equilibrium to the initial long-run equilibrium and to the short-run equilibrium found in a).
The average cost at this quantity is [ Answer53 ] dollars per unit.
In a perfect competition, the cost function of each of 100 firms is given as: C = + 0.2q² + 4q +10 - 0.2g? 300 The market demand function is given by: Q = 8000 – 200P What is each firm's short-run equilibrium quantity? А. 15 В. 20 С. 25 D. 30
Problem 2. Suppose the market demand and inverse-demand for pizza in East Lansing is given by: Demand: Qd 1100-5P 220-2₁ Inverse-Demand: P = 220- Currently, there are 100 pizza stores in the East Lansing area that produce identical pizzas and as such the market is perfectly competitive. Suppose each pizza store has identical cost function given by: C(q) = 100 +g+q², fixed-cost I MC(q)=1+2q where C(q) is the total cost, and MC(q) is the marginal cost function. As shown in the total cost function, each pizza store incurs a $100 fixed cost which is a sunk-cost in the short-run but avoidable in the long-run. Recall that the market supply is the sum of individual firm's supply functions, and that individual's (inverse) supply curve is given by its marginal cost function i.e. Individual firm's inverse-supply: P= mc(q) = 1 + 2q Individual firm's supply: 9,= 0.5P - 0.5 Market Supply: 2, 100q, = 50P - 50 (a) What is the short-run equilibrium market price/quantity of pizza in East Lansing? (b)…
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question7) the following is the total cost function and demand function of a certain firm TC= 100 +20Q + 7QQd = 130-2Pa)- What is the type of this market? why? b)Calculate the profit maximizing level of output and price for this firm. c) Does the firm make profit or loss at this level of output? Why? d)Should the firm produce this level of output or shut down? Why? please all do subparts because I have very urgent solution
52) Pappy's Popcorn Emporium operates in a perfectly competitive industry and hires you as an economic consultant. Pappy's is currently producing at a point where market price equals its marginal cost. Its market price is less than its average variable cost. You advise Pappy's to A) cease production immediately because it is not covering its operating costs. B) lower its price so that it can sell more units of output. C) produce in the short run to minimize its loss, but exit the industry in the long run. D) raise its price until it breaks even. 53) A firm will ________ in the short run if variable costs exceed revenues. A) earn a profit B) produce at a loss C) break even D) shut down 54) A perfectly competitive firm's ________ point is the lowest point on its AVC curve. A) profit maximizing B) break-even C) shut down D) loss maximizing 55) A firm ________ in the short-run has an incentive to expand its long-run scale…
Consider a perfectly competitive market where the demand for the good is given by Q-769-5p, where Q denotes the quantity demanded at price p. On the supply side, the good can be produced by identical firms with U-shaped average cost curves. The total cost of the industry as a function of total output, Q, is given by C(Q) = 5 Q What is the (long run) equilibrium price in this market? (As usual, you must enter a number below, not a ratio, not an expression with symbols..., just a number. Don't round, even if rounding makes sense...)
Consider a competitive industry with a market demand curve of P = 252 – Q, where P is market price and Q is the quantity demanded in the market. Each firm in the industry has a cost function of TC = 196 + q2, if q > 0 where q is output of the individual firm (TC = 0 if q = 0). The market is initially in long-run equilibrium. The government decides to regulate the industry by issuing licences to all firms currently in the industry, and not to allow any further entry by other firms without a licence. That is, the number of licences is fixed, and entry requires that an existing licence holder sells their licence to the potential entrant, leaving the number of firms producing in the industry fixed. Subsequent to the introduction of this regulation, the market demand curve shifts to P = 432 – Q. What is the value of the licence?

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