Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 22, Problem 1CQ
To determine
The effect of high cost of machinery, labor, and fertilizers in changing profit of farmers.
Expert Solution & Answer
Explanation of Solution
In the short run, the lower resource price will make profit in the market. This is because in the short run only a small number of firms share the market share and they will sell the product above their average cost. However, in the long run, many firms are sharing the market share because of the non-barriers to entry. Then, the profit in the market becomes zero due to the decrease in demand, which resulted from
Economics Concept Introduction
Perfect competitive market:
Price takers: If a firm is said to be a price taker, it will accept the prevailing price in the market.
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Economics: Private and Public Choice
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