ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337408059
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 8, Problem 14P
A
To determine
The supply curve which indicates a constant supply industry and the one which indicates an increasing cost industry and to differentiate between a constant cost industry and an increasing cost industry.
B
To determine
The long run impact of an increase in market
Expert Solution & Answer
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Students have asked these similar questions
1. Assume you have a perfectly competitive market with two types of firms. The only
difference between the two types of firms is that the minimum average cost at
which firms of type A can produce is lower than the minimum average cost at
which firms of type B can produce.
a. Give a graphical example of what the individual long run supply functions
of a type A firm and a type B firm may look like. Explain the shape in detail.
b. Based on your example, what will the aggregate supply curve of a market
with 2 firms, one type A and one type B, look like? Explain the shape in
detail.
C. Assume now that all potential firms are identical. Evaluate the impact of a
demand shock on the long run equilibrium market price and firm numbers.
You must use graphical analysis and explain in detail.
1. The accompanying graph
summarizes the demand and costs
for a firm that operates in a perfectly competitive market.
a. What level of output should this firm produce in the short run?
b. What price should this firm charge in the short run?
c. What is the firm's total cost at this level of output?
d. What is the firm's total variable cost at this level of output?
e. What is the firm's fixed cost at this level of output?
f. What is the firm's profit if it produces this level of output?
g. What is the firm's profit if it shuts down?
h. In the long run, should this firm continue to operate or shut down?
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ATC
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AVC
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-Quantity
1. Consider market adjustment from the short-run to the long-run under a perfectly
competitive market. What will happen in the market if a typical firm in
the market is making economic profit or loss?
2. Use a set of two graphs, one graph for the market and the other graph for a firm,
to show the long-run equilibrium under a perfectly competitive market. What is
the level of economic profit for the firms in this case?
Chapter 8 Solutions
ECON MICRO (with MindTap, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
Knowledge Booster
Similar questions
- A single firm in a perfectly competitive market is relatively small compared to the rest of the market. What does this mean? How small is small?arrow_forward11. Consider a competitive market where firms have U-shaped cost curves. Which of the following is true? a. The long run market supply curve for a constant cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping. b. The long run market supply curve for an increasing cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping. c. The long run market supply curve for a decreasing cost industry is upward sloping, and, the short run supply curve of each firm is upward sloping. d. The long run market supply curve for an increasing cost industry is downward sloping, and, the short run supply curve of each firm is horizontal. e. None of the above.arrow_forwardIn the long run, some firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the viral video and the new long- run equilibrium after firms and consumers finish adjusting to the news. PRICE (Dollars per pound) 10 9 8 7 2 1 0 0 35 I Supply Demand 70 105 140 175 210 245 QUANTITY (Millions of pounds) 280 315 350 Demand Supply until ? The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is run. in the longarrow_forward
- Suppose a $2 tax imposed on consumers causes the demand curve to shift down to D₂. At the new equilibrium price (shown by the intersection of D₂ and Supply), each firm would earn profit in the long run. If this is a constant-cost industry, firms will the industry when moving from the short run to the long run until the equilibrium market price is per cat toy. True or False: Because this is a constant-cost industry, the incidence of this tax falls equally on consumers and producers in the long run. O True Falsearrow_forwardIn the long run, some firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the viral video and the new long- run equilibrium after firms and consumers finish adjusting to the news. PRICE (Dollars per pound) 2 1 0 0 Supply Demand until 40 60 80 100 120 140 160 100 200 QUANTITY (Millions of pounds) Demand 1 Supply The new equilibrium price and quantity suggest that the shape of the long-run supply curve in this industry is in the longarrow_forward( 8. Short-run and long-run effects of a shift in demand Suppose that the jackfruit industry is initially operating in long-run equilibrium at a price level of $5 per pound of Jackfruit and quantity of 175 million pounds per year. Suppose a top medical journal publishes research that animal-alternative protein sources such as Jackfruit could increase your expected lifespan by 4 years. The publication is expected to cause consumers to demand Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the publication. (punod jad sig 10 PRICE (Dolars per pound) In the long run, some firms will respond by 10 a 8 T 6 5 3 2 Supply EX Demand Shift the demand curve, the supply curve, or both on the following graph to Tlustrate both the short-run effects of the publication and the new long- run equilibrium after firms and consumers finish adjusting to the news 1 915 0 005 140 QUANTITY Mllions of pounds) 35 280 315 360 Demand Jackfruit at…arrow_forward
- 23. Suppose the market for gourmet chocolate is in long-run equilibrium, and an economic downturn has reduced consumer discretionary incomes. Assume chocolate is a normal good, and the chocolate producers have identical cost structures. What will happen to demand—shift right, shift left, no shift? What will happen to profits for chocolate producers in the short run—increase, decrease, or no change? What will happen to the short-run supply curve—increase, decrease, or no change? What will happen to the long-run supply curve—increase, decrease, or no change?arrow_forwardM/c question - Micro 29) What is a characteristic of a perfectly competitive market? A. Goods offered for sale are largely the same B. There are not many sellers in the market C. Firms have difficulty entering the market D. Firms are price setters 28) Refer to Table 14-2. At which quantity of output is marginal revenue equal to marginal cost? A. 8 B. 4 C. 6 D. 2arrow_forwardHow does an increase in market demand for a product in a perfectly competitive market affectthe short-run and long-run equilibrium? Show on a diagram and discuss the adjustments firms make in terms of price and quantity to reach the new equilibrium. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- 8. Short-run and long-run effects of a shift in demand Suppose that the tuna industry is in long-run equilibrium at a price of $5 per can of tuna and a quantity of 200 million cans per year. Suppose the Surgeon General issues a report saying that eating tuna is bad for your health. The Surgeon General’s report will cause consumers to demand ______ tuna at every price. In the short run, firms will respond by ____. Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the Surgeon General’s report.arrow_forward11. The graph below shows the marginal revenue, marginal cost, and average total cost at different quantities for a firm in a perfectly competitive market. If this firm chooses to produce no output in the short run, what must the market price be? A-Below $20 $21-$30 $31-$40 $41-$50 Above $50 7. firm's implicit costs are $10,000, explicit costs are $5,000, and its total revenue is $10,000. This firm is earning A-normal accounting profit B-positive accounting profit of $5,000 C-positive economic profit of $5,000 D-normal economic profit E-negative accounting profit of $5,000arrow_forwardper cat toy. At this price, each firm would earn In the short run, the equilibrium market price is $ the industry when moving from the short run to the long run until the equilibrium market price is $ run. Therefore, firms will per cat toy. On the following graph, use the orange line (square symbol) to graph the long-run supply curve for cat toys in this industry. PRICE (Dollars per cat toy) 10 9 8 2 1 0 0 Demand + 80 10 20 30 40 50 60 70 QUANTITY (Thousands of cat toys per year) 90 100 Long-Run Supply (?) profit in the long image 2arrow_forward
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