**Understanding Perfect Competition: Cost Curves and Market Entry****7.2.4** Refer to the figure below for a perfectly competitive producer.In the diagram, we have cost curves against quantity produced for a firm in a perfectly competitive market:- **MC (Marginal Cost)**: This curve represents the additional cost of producing one more unit. It typically slopes upwards.- **ATC (Average Total Cost)**: This curve is U-shaped, indicating that costs per unit decrease, reach a minimum point, and then start increasing as more units are produced.- **AVC (Average Variable Cost)**: This curve is also U-shaped and lies below the ATC curve, representing the variable costs per unit.**Price and Cost Levels:**- A horizontal line at **$5** indicates a potential market price.- Another horizontal line at **$4** suggests a lower price level.**Question:**The firm would attract new entrants into the industry if the price is:- $ \circ $ anywhere below $5.- $ \circ $ below $5 but above $4.- $ \circ $ below $4.- $ \circ $ above $5.Considerations:New entrants are likely attracted if the market price is above the ATC, as this ensures profit. If the price is only above AVC but below ATC, firms may not cover all costs in the long run.

normal-profits are defined as the profits that are required by the firm to break even and continue…

Answered: The firm would attract new entrants…

Business

Economics

The firm would attract new entrants into the industry if the price is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Suppose that the tempeh industry is initially operating in long-run equilibrium at a price level of…

A: Referenceshttps://courses.lumenlearning.com/wm-microeconomics/chapter/entry-and-exit-decisions-in-th…

Q: ...... are more than just names and symbols. product quality packaging micromarketing product…

A: At the marketplace, different terminologies are used to explain different situations such as…

Q: Total revenue from the sale of X is given by the equation R=60Q-Q2. Calculate the value of marginal…

A: The marginal revenue would be the ratio of change in the total revenue and the total change in the…

Q: A new restaurant – Chang – has just opened in Austin. It is serving the upscale market, with truly…

A: Given information: There is a restaurant- Chang- that has just opened in Austin. Following is the…

Q: A theatre charges 12$ per tickets for musical shows. Average attendance at these shows is 16,000.…

A: Demand is the quantity required by the consumer when the consumer is willing and capable to pay for…

Q: A firm faces the demand curve: P = 1,374 - 16Q. What is the firm's revenue maximizing price? Enter…

A: "Demand function of a firm shows a negative relationship between price of a product and quantity…

Q: In a competitive market, the long-run demand is given by P = 20 - (0.01)*q Firms in the industry…

A: Given information Long run demand function P = 20 - (0.01)*q Cost function C = q3 - 5q2 + 10q

Q: BoseHeadphones produces a variety of headphones that is slightly different from the other brands in…

A: The market structure where the goods sold are slightly different from other brands is called…

Q: An unfavorable shift in demand will upset the original equilibrium and produce losses. However, the…

A: Short-flee by turning around this interaction. Say that the market is in since a long time ago run…

Q: A firm faces the following demand and cost functions: Q=2000-4P TC = 2500 + 80Q-.75Q² +0³ Find the…

A: Profit-Maximizing Condition:The profit-maximizing condition for a firm occurs when the firm produces…

Q: Assume Standard Oil owns all the refineries in the US. What would be the price it would charge for…

A: The markets are the place where the interaction of the buyers and the sellers take place. In the…

Q: A firm faces the demand curve: P = 4,624 - 8Q. What is the firm’s revenue maximizing price? Enter…

A: (Q) A firm faces the demand curve: P = 4,624 - 8Q. What is the firm’s revenue-maximizing price?…

Q: Market equilibrium takes place when MC < MR

A: Market equilibrium is a state of rest where there is no tendency to move further.

Q: Revenue If the price in dollars of a stereo system is given by p(g) = 1000 + 1000, where q…

A: Given p(q) = 1000/(q)^2 + 1000. Total revenue = p × q Total revenue = [1000/(q)^2 + 1000] × q…

Q: difference between scarcity and scale of preference

A: Since you have asked multiple questions, we will solve first question for you. If you want any…

Q: If the marginal cost to make a good is $181 and the price elasticity of demand is -8, what price…

A: In this case, we have to discuss the term mark-up price as well as cost, marginal cost and price…

Q: Suppose Maruti has the following demand and supply function for Cultus VXL: Qd = 55 - 5P…

A: Equilibrium Qd = 55 - 5P Qs = - 50 + 10P

Q: Assuming a linear demand curve, a firm that wants to maximize its revenue will charge a lower price…

A: Answer: A linear demand curve is a straight line curve (either downward sloping or horizontal) that…

Q: A firm faces the demand curve: P = 2,892-8Q. What is the firm's revenue maximizing price? Enter as a…

A: The total amount of money a firm or business receives from selling its goods or services over a…

Q: A profit-maximizing firm with market power will always produce a level of output where Multiple…

A: A firm aiming to maximize profits, endowed with market power, will tend to produce a quantity of…

Q: The burrito truck industry in the city is perfectly competitive. On any given evening, the market…

A: Given; Demand function; QD=67-p Where; QD= Quantity of Burritos demandedp= Price of Burritos Rent of…

Q: a) Why does TRUVADA cost $1,780 in the United States whereas it's just $8 in Australia? b) Can you…

A: Price discrimination refers to the situation when the producer or the seller sells the same product…

Q: The demand function for a particular item is D(x)=(100)/(3x+7). Find the marginal revenue when x=3.…

A: In this case, we have to discuss the demand function. Demand function is actually showing the…

Q: profit maximizing price and the rate of output

A: Profit is the amount of total revenue which a producer or seller gets after deducting all the costs.…

Q: Should the company also reduce price in order to maintain market share, or should the company…

A: Market share is the percentage of an industry’s total sales that is earned by a specific company…

Q: The demand for the book is P = 89 - 2Q. A bookstore can order copies that will cost $5. If the…

A: The profit of a firm can calculate by reducing total cost from total revenue. Profit = Total…

Q: You are the owner of a car dealership and you practice “no haggle” sales policy. Last year, you made…

A: How much should you charge to maintain your record profit. To find record profit we will apply…

Q: A microbrewery operates next to the Bushville Lake and uses water from the lake during production.…

A: The objective of the question is to determine the quantity of beer that will be produced by the…

Q: A toy manufacturing from has demand for the product is given by the demand function Q= 500 - 3p.…

A: The demand function for the toy firm; Q = 500 - 3P Price = P Quantity = Q We are required to find…

Q: Which of the following is not a way in which a product differentiator firm would differentiate…

A: Product differentiation is a marketing approach used to set a company's products or services apart…

Q: Barriers to entry exist for perfectly competitive firms. restrict the entry of new firms into the…

Q: total cost function of one of the firms is expressed by C(Q) = 100 + 4Q2, and demand is P = 80 – 4Q…

A: A monopoly is a sole producer of a good in the market thus acting as a price maker whereas in a…

Q: Parkleigh Pharmacy is an upscale department store in Rochester, NY, that sells personal accessories…

A: Kaufmann's offers diverse products for middle-class customers, using sales commissions to drive…

Q: A firm sells its product in a perfectly competitive market where other firms charge a price of $110…

A: Perfect competition is a hypothetical market structure in which there are many buyers and sellers,…

Q: A new restaurant – Uovo – has just opened in West L.A. It is serving the upscale market, with truly…

A: Given information; A restaurant faces the following demand function: Q = 600 - 4P Where Q is the…

Q: A firm faces the demand curve: P = 800 - 25Q. What is the firm’s revenue maximizing price?

A: Revenue is an important economic concept that refers to the amount of income that a firm receives…

Q: A firm faces the demand curve: P = 4,724-15Q. What is the firm's revenue maximizing price? Enter as…

A: Revenue is the proceeds that are collected by selling the goods or services in the market. Given…

Question

**Understanding Perfect Competition: Cost Curves and Market Entry**

**7.2.4** Refer to the figure below for a perfectly competitive producer.

In the diagram, we have cost curves against quantity produced for a firm in a perfectly competitive market:

- **MC (Marginal Cost)**: This curve represents the additional cost of producing one more unit. It typically slopes upwards.
- **ATC (Average Total Cost)**: This curve is U-shaped, indicating that costs per unit decrease, reach a minimum point, and then start increasing as more units are produced.
- **AVC (Average Variable Cost)**: This curve is also U-shaped and lies below the ATC curve, representing the variable costs per unit.

**Price and Cost Levels:**
- A horizontal line at **$5** indicates a potential market price.
- Another horizontal line at **$4** suggests a lower price level.

**Question:**
The firm would attract new entrants into the industry if the price is:

- $ \circ $ anywhere below $5.
- $ \circ $ below $5 but above $4.
- $ \circ $ below $4.
- $ \circ $ above $5.

Considerations:
New entrants are likely attracted if the market price is above the ATC, as this ensures profit. If the price is only above AVC but below ATC, firms may not cover all costs in the long run.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Price discrimination is only possible in perfect competition. True / False
Imagine that the flat-screen TV market is made up of one large firm that leads the industry and sets its own price first, and another firm that follows the leader when deciding its own profit-maximizing strategy. The leader has a cost function of cL (qL) = 5q1, and the follower has a cost function of cp(qr) = where Q = qL + qF. Total market demand for flat-screen TVs is given by the function Q = 950.00 – 2p. Calculate the following values: Leading firm's production: qL = (Round to two decimals if necessary.) Follower firm's production: qF = (Round to two decimals if necessary.) Equilibrium price: p= S (Round to two decimals if necessary.)
When advertising increases brand loyalty for your company's brand, then the company's demand curve becomes: more unstable. horizontal. more elastic. less elastic.
Given Question #1 Cost function C= 3000+6Q Q = 4400 - 200Q - This is the demand function Q= 1600 P = 14 Profit= 22400-12600 = 9800 Question #2 Q=$480 Q=$1120 Please answer Question #3 (A-E)
E. The assumption of profit maximization, where profit (t) is equal to the difference between total revenue (TR) and total cost (TC), is essential in microeconomics. To maximize profit, the firm selects the quantity of output (Q) where marginal revenue (MR) equals marginal cost (MC). a. Given the demand function P = 70 – 10Q, find the total revenue function (Hint: TR = Px Q). b. Using the total revenue function, find the corresponding marginal revenue function. C. Find the marginal cost function using the total cost function given by TC(Q) = 175 – 50Q + 20Q² d. Find the profit maximizing quantity of output.
A firm faces a demand function (where q=quantity demanded and p=price): q = 200 – 2p and a total cost (TC) function (where q=output): TC =0.5q2 + 20q +375 Find the firm’s profit maximizing output level using the profit maximizing condition MR = MC
A typical firms supply curve is perfectly inelastic when the price is below or above the break-even price. It is infinitely elastic when the price equals the break-even price. True False
A competitive firm's cost of producing q units of output is TC=18+4q+q^2 Its corresponding marginal cost is MC=4+2q The firm faces a market price p = $24. Create a spreadsheet with q = 0, 1, 2, …, 15, where the columns are q, TR, TC, TVC, AVC, MC, and profit. Determine the profit-maximizing output for the firm and the corresponding profit. Should the firm produce this level of output or should it shut down? Explain briefly. Suppose the competitive price declines to p = $12. Repeat the calculations of part a. Should the firm shut down?
Fruit market (a perfectly competitive market), the industry demand and supply of tomato (a homogenous product) is given by the following equations respectively: Qd = 50 − P Qs = 1 + 3P The typical firm’s total cost is given by the following equation: TC = 10 + 0.5Q2 + 5Q What is the equilibrium price and quantity in this market? What is the firm’s MC function? What is the MR function? What is the profit maximizing level of output for the firm? How much profit is this firm earning? Show it graphically Is it short run or long run? Explain!
A market has N=35 firms each with identical costs C(q)=1q2+70. Demand is QD=200-5p. What will be the short-run equilibrium price? Round to the nearest cent (0.01)
Mr. Nelson, the manager of a US company, entered into a contract with an Italian company, Roma, to order some leather suitcases. The Goods were delivered on time, but with some of the zippers on the suitcase defective. Mr. Nelson contracted Roma and gave a notice that he wanted to cancel the contract. Roma responded that they only can give a reduction in the price. Who is legally right?
A toy manufacturing from has demand for the product is given by the demand function Q= 500 - 3p. Where P is the price in dollars and q is the quantity sold per year. To sell 200 units, what price should the firm charge.