Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
Question
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Chapter 13, Problem 10QE

(a)

To determine

Calculate the equilibrium price.

(b)

To determine

Calculate the equilibrium quantity.

(c)

To determine

Calculate the total profit of each firm.

(d)

To determine

The price at which the firm will exit.

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The following graph shows a firm’s marginal cost and average cost of production of raspberries. a. The equilibrium price at this market is $2.5. At this price, is the firm earning economic profit or is itincurring economic losses?b. Is the firm operating in a competitive market based on the given information? Why?c. Suppose the price of raspberries increases to $5. How would you answer a. and b. in this case?d. If the market is indeed competitive, what will happen after the price increase in c.? What will bethe final price and the long-term profit of the firm?
17. A market is in long-run equilibrium and firms in this market have identical cost structures. Suppose demand in this market decreases. a. Describe what happens to the profit-maximizing output quantity for individual firms as the market leaves and then returns to long-run equilibrium. b. Describe what happens to the market quantity as the market leaves and then returns to long-run equilibrium.
a perfectly competitive market over the long run, a. an increase in market demand or a decrease in firms' costs will lead to a decrease in the number of firms operating within the market. b. an improvement in production technology will increase profits at fust, but those profits will be competed away over time as more firms enter the industry and reduce market price. c. market price will equal maximum possible average total cost in long-run equilibrium. d. an increase in demand will cause the final market equilibrium to be at the original price but at a lower output level.
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