Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 4.1, Problem 1QQ
To determine
Market and
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What is special about a purely competitive market?
1. Does a perfectly competitive market exist in real life? Look at the following markets
and describe how close they are to perfect competition.
i. Market for bottled water.
ii. Market for foreign currency (say US$).
iii. Market for pork buns.
Chapter 4 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
Ch. 4.1 - Prob. 1QQCh. 4.2 - Prob. 2QQCh. 4.3 - Prob. 3QQCh. 4.4 - Prob. 4QQCh. 4 - Prob. 1CQQCh. 4 - Prob. 2CQQCh. 4 - Prob. 3CQQCh. 4 - Prob. 4CQQCh. 4 - Prob. 5CQQCh. 4 - Prob. 6CQQ
Ch. 4 - Prob. 1QRCh. 4 - Prob. 2QRCh. 4 - Prob. 3QRCh. 4 - Prob. 4QRCh. 4 - Prob. 5QRCh. 4 - Prob. 6QRCh. 4 - Prob. 7QRCh. 4 - Prob. 8QRCh. 4 - Prob. 9QRCh. 4 - Prob. 1PACh. 4 - Prob. 2PACh. 4 - Consider the market for minivans. For each of the...Ch. 4 - Prob. 4PACh. 4 - Prob. 5PACh. 4 - Prob. 6PACh. 4 - Prob. 7PACh. 4 - Prob. 8PACh. 4 - Prob. 9PACh. 4 - Prob. 10PACh. 4 - Prob. 11PA
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- Firms ill a perfectly competitive market are said to be price takers that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?arrow_forwardDon't use Aiarrow_forward4. Examine the behavior of perfect competitive markets. How are prices determined in competitive markets? How does competition affect the profits of a firm or industry? What does society gain from market competition?arrow_forward
- 2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 36 32 28 24 20 16 12 8 4 0 0 MC ATC 2 4 8 10 12 14 16 18 20 QUANTITY (Thousands of wind chimes per day) AVC 6 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? loss in si LIGHT OF LOSS IN SUCARAMIH OF HIS STAPAL. graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the long-run supply curve in equilibrium for this market,…arrow_forwardWhat are the main characteristics ot a competitive market! Explain the difference between a firm's revenue and its profit. Which do firms maximize?arrow_forward4. Profit maximization in the cost-curve diagram Suppose that the market for flannel shirts is a perfectly competitive market. The following graph shows the daily cost curves of a firm operating in thi market. 50 45 40 PRICE (Dollars per shirt) 10 8 д 8 35 35 ATC AVC 10 MC in 5 0 0 2 4 6 8 10 12 14 16 18 20 QUANTITY (Thousands of shirts) Profit or Loss In the short run, at a market price of $15 per shirt, this firm will choose to produce 10,000 shirts per day.arrow_forward
- Refer to the information provided in Table 8.2 below to answer the question(s) that follow. Show your computation. Table 8.2 Number of Earrings TVC MC AVC TFC TC AFC ATC 100 1 50 95 3 46.67 4 300 5 270 7) Assume that Sherry's Earrings is producing in a perfectly competitive market and the market price for earrings is $60. To maximize profits, how many pairs of earrings should Sherry producearrow_forwardD Question 29 Which of the following statements correctly describes a perfectly competitive market? O Haggling and bargaining is commonly observed in a perfectly competitive market. O Buyers in a perfectly competitive market pay different prices according to their individual demand. In a perfectly competitive market, individual sellers and buyers can influence the market price. O All participants in a perfectly competitive market are price takers.arrow_forwardMmarrow_forward
- Is a competitive market “efficient”? Define efficiency and explain.arrow_forward2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 36 32 28 24 20 16 2 8 4 0 0 MC ATC AVC 2 4 QUANTITY (Thousands of wind chimes per day) 6 8 10 12 14 16 18 20 market: a) In short run, at a market price of $26 per wind chime, how much will firm choose to produce per day? How do you know? b) If the market price is $26 in the short run, and the firm chooses to produce the quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall?…arrow_forwardGood Afternoon I asked this question to your colleague but he didn't explain what his diagram means like what is E what is SS what is D and DD'. Can you please either solve the question or explain what his diagram means. Tell me what all the terms of the diagram mean. Thank youarrow_forward
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