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 $24 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? percent b. The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of return? 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?
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 $24 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? percent b. The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of return? 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?
Chapter7: Perefect Competition
Section: Chapter Questions
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Transcribed Image Text: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 $24 for every $300 invested.
Instructions: Enter your answers as a whole number.
a. What is the percentage rate of return for these 298 dairies?
percent
b. The other two dairies have a cost structure that generates profits of $22 for every $200 invested. What is their percentage rate of
return?
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?
(Click to select)
d. Will the change in the number of firms affect the two that earn $22 for every $200 invested?
Yes, because those two firms can claim a larger market share.
No, because the exiting firms didn't belong in the industry.
Yes, because those exiting firms will spread their technology.
No, because those two firms are too small.
e. What will be the rate of return earned by most firms in the industry in long-run equilibrium?
percent
f. If firms can copy each other's technology, what will be the rate of return eventually earned by all firms?
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