Will, Jill, and Phil are all wheat farmers. The wheat industry is perfectly (purely) competitive. The first chart shows how much each farmer produces at different price levels. The second chart shows each farmer's minimum average total cost (ATC), average variable cost (AVC), and marginal cost (MC). Based on this data (assuming these three are the only producers), answer the questions that follow. Short-run quantity supplied Price Will Jill Phil $2.00 4 2 0 $4.00 6 4 2 $6.00 9 5 4 $8.00 12 8 6 Firm a. What is the cause of the divergence in the short-run Minimum ATC and long-run supply curves? Minimum AVC Minimum MC $1.00 $2.00 Will Jill Phil $2.50 $5.00 $7.00 $2.50 $0.50 $1.00 $2.00 government regulation changes in the market differing individual cost structures b. Suppose that the market price dips to $2.25 in the short run before ultimately settling at $2.50 per bushel. Who exits immediately, and who exits in the long-run when costs are no longer fixed? Phil exits immediately, Jill exits in the long-run Phil exits immediately, Will exits in the long-run Jill exits immediately, Will exits in the long-run Jill exits immediately, Phil exits in the long-run c. Which curve will be farther right (higher supply) if graphed? long-run industry supply short-run industry supply
Will, Jill, and Phil are all wheat farmers. The wheat industry is perfectly (purely) competitive. The first chart shows how much each farmer produces at different price levels. The second chart shows each farmer's minimum average total cost (ATC), average variable cost (AVC), and marginal cost (MC). Based on this data (assuming these three are the only producers), answer the questions that follow. Short-run quantity supplied Price Will Jill Phil $2.00 4 2 0 $4.00 6 4 2 $6.00 9 5 4 $8.00 12 8 6 Firm a. What is the cause of the divergence in the short-run Minimum ATC and long-run supply curves? Minimum AVC Minimum MC $1.00 $2.00 Will Jill Phil $2.50 $5.00 $7.00 $2.50 $0.50 $1.00 $2.00 government regulation changes in the market differing individual cost structures b. Suppose that the market price dips to $2.25 in the short run before ultimately settling at $2.50 per bushel. Who exits immediately, and who exits in the long-run when costs are no longer fixed? Phil exits immediately, Jill exits in the long-run Phil exits immediately, Will exits in the long-run Jill exits immediately, Will exits in the long-run Jill exits immediately, Phil exits in the long-run c. Which curve will be farther right (higher supply) if graphed? long-run industry supply short-run industry supply
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Will, Jill, and Phil are all wheat farmers. The wheat industry
is perfectly (purely) competitive. The first chart shows how
much each farmer produces at different price levels. The
second chart shows each farmer's minimum average total cost
(ATC), average variable cost (AVC), and marginal cost (MC).
Based on this data (assuming these three are the only
producers), answer the questions that follow.
Short-run quantity supplied
Price
Will
Jill
Phil
$2.00
4
2
0
$4.00
6
4
2
$6.00
9
5
4
$8.00
12
8
6
Firm
a. What is the cause of the divergence in the short-run
Minimum ATC
and long-run supply curves?
Minimum AVC
Minimum MC
$1.00 $2.00
Will Jill Phil
$2.50 $5.00 $7.00
$2.50
$0.50
$1.00 $2.00
government regulation
changes in the market
differing individual cost structures
b. Suppose that the market price dips to $2.25 in the
short run before ultimately settling at $2.50 per bushel.
Who exits immediately, and who exits in the long-run
when costs are no longer fixed?
Phil exits immediately, Jill exits in the long-run
Phil exits immediately, Will exits in the long-run
Jill exits immediately, Will exits in the long-run
Jill exits immediately, Phil exits in the long-run
c. Which curve will be farther right (higher supply) if
graphed?
long-run industry supply
short-run industry supply
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