There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $21 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? 7 percent b. The other two dairies have a cost structure that generates profits of $24 for every $200 invested. What is their percentage rate of return? 12 percent c. Assuming that the normal rate of profit in the economy is 9 percent, and that firms cannot copy each other's technology, will there be entry or exit? Exit d. Will the change in the number of firms affect the two that earn $24 for every $200 invested? Yes, because those exiting firms will spread their technology. No, because those two firms are too small. No, because the exiting firms didn't belong in the industry. Yes, because those two firms can claim a larger market share. e. What will be the rate of return earned by most firms in the industry in long-run equilibrium? 9 percent f. If firms can copy each other's technology, what will be the rate of return eventually earned by all firms? 10 percent

There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $21 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? 7 percent b. The other two dairies have a cost structure that generates profits of $24 for every $200 invested. What is their percentage rate of return? 12 percent c. Assuming that the normal rate of profit in the economy is 9 percent, and that firms cannot copy each other's technology, will there be entry or exit? Exit d. Will the change in the number of firms affect the two that earn $24 for every $200 invested? Yes, because those exiting firms will spread their technology. No, because those two firms are too small. No, because the exiting firms didn't belong in the industry. Yes, because those two firms can claim a larger market share. e. What will be the rate of return earned by most firms in the industry in long-run equilibrium? 9 percent f. If firms can copy each other's technology, what will be the rate of return eventually earned by all firms? 10 percent

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Problem 10-07 (algo)
There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298
have a cost structure that generates profits of $21 for every $300 invested.
Instructions: Enter your answers as a whole number.
a. What is the percentage rate of return for these 298 dairies?
7 percent
b. The other two dairies have a cost structure that generates profits of $24 for every $200
invested. What is their percentage rate of return?
12 percent
c. Assuming that the normal rate of profit in the economy is 9 percent, and that firms cannot
copy each other's technology, will there be entry or exit?
Exit
d. Will the change in the number of firms affect the two that earn $24 for every $200 invested?
Yes, because those exiting firms will spread their technology.
No, because those two firms are too small.
No, because the exiting firms didn't belong in the industry.
Yes, because those two firms can claim a larger market share.
e. What will be the rate of return earned by most firms in the industry in long-run equilibrium?
9 percent
f. If firms can copy each other's technology, what will be the rate of return eventually earned
by all firms?
10 percent

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Step 2: find Percentage rate of return for 298 diaries

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Step 3: Rate of return on two diaries

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Step 4: Find entry or exit and their effect on market industry

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Step 5: Find rate of return in Long run

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