Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
20th Edition
ISBN: 9780078021756
Author: McConnell, Campbell R.; Brue, Stanley L.; Flynn Dr., Sean Masaki
Publisher: McGraw-Hill Education
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Chapter 11, Problem 5DQ
To determine
Pure competition and the lower cost method.
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Suppose that the pen-making industry is perfectly competitive. Also suppose that each current firm and any potential firms that might enter the industry all have identical cost curves, with minimum ATC = $1.25 per pen. If the market equilibrium price of pens is currently $1.50, what would you expect it to be in the long run? LO11.2 a. $0.25. b. $1.00. c. $1.25. d. $1.50.
Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3 a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firm’s MC curve.
Complete the table above.
Graph AVC , ATC, and MC on the same graph.
Suppose market price is $30. How much will the firm produce in the short run? How much are total revenue?
Suppose market price is $50. How much will the firm produce in the short run? What are total profits?
Chapter 11 Solutions
Economics: Principles, Problems, & Policies (McGraw-Hill Series in Economics) - Standalone book
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- Can someone please help me with this question?arrow_forward34. How do i solve this questionarrow_forwardWhich one of the following is true for a firm under perfect competition when all firms face identical costs? O I t can earn supernormal profits in the short run but only normal profits in the long run. O Whether it earns normal or supernormal profits in both the short and the long run will depend on the conditions in that particular industry. O I t can earn supernormal profits in the long run but only normal profits in the short run. O It can earn only normal profits in both the short and the long run. O t can earn supernormal profits in both the short and the long run.arrow_forward
- In the table below, the firm; Output Total Revenue Total Cost $0 $30 $60 $90 $120 $150 $180 $25 $49 $69 $91 $117 $147 $180 O a. cannot be in a perfectly competitive industry, because its short-run economic profits are greater than zero. O b. must be in a perfectly competitive industry, because its marginal cost curve eventually rises. O c. cannot be in a perfectly competitive industry, because its long-run economic profits are greater than zero O d. must be in a perfectly competitive industry, because its marginal revenue is constant. 123 456arrow_forward2 .arrow_forward1arrow_forward
- The figure shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces O A. 20 units of output and earns a normal profit. MC ATC 50 B. 10 units of output and incurs an economic loss. 40 O C. 10 units of output and earns a normal profit. O D. 20 units of output and incurs an economic loss. 30 MR 20 10 10 30 40 Quantity (per day) Price and costs (dollars) 20arrow_forwardCosts of production for each competitive firm is given by: C(q) = 1 + q2. Market demand is Qd = 200 - 5p. What is the number of firms in the long-run equilibrium? O 110 O 150 O 190 210arrow_forwardCH $1.50 $1.25 $0.75 150 9 In the above figure, assume that So represents the industry supply curve and Do represents the demand curve in a perfectly competitive market. What can be said about the demand curve that an individual firm faces? O An individual firm will face a downward sloping demand curve starting at $1.25. O An individual firm will tace a horizontal demand curve at $1.25. O An individual firm will face a vertical demand curve at 250. O An individual firm will face the demand curve indicated by Do 4arrow_forward
- Stuff, Incorporated is a firm with a total revenue of $1,000, marginal cost of $5, and average variable cost of $4. Both the output and input markets are perfectly competitive and Stuff, Inc. is in long run equilibrium. Stuff, Inc.'s output and total fixed costs must be equal to which of the following? O Output 200; Fixed Cost $200 O Output 200; Fixed Cost $400 O Output 200; Fixed Cost $800 O Output 250; Fixed Cost $800 O Output 250; Fixed Cost $400arrow_forward19arrow_forwardWhich of the following is directly implied by an industry having many small firms producing homogeneous goods? O a. each firm in the market is a price taker Ob.each firm in the market will earn zero economic profit in the long run Oc each firm in the market will earn zero economic profit in the short run Od. each firm in the market will earn losses due to excessive entry by new firms O e. each firms sells output at the same pricearrow_forward
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