Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter 8, Problem 19SQ
To determine
The setting of price in the long run equilibrium.
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A. If a firm operating in a perfectly competitive market doubles the amount it sells, what happens to the price of its output and its total revenue?
B. How does a competitive firm determine its profit-maximizing level of output? When does a competitive firm decide to temporarily shut down in the short run? Explain, using the concepts of marginal cost, marginal revenue, price, and average variable cost.
The graph below provides a perfectly competitive graph for a firm in the short run, complete 1a – 1d using the graph.
a. Assume the price of the firm’s product in the graph is $15 per unit. The firm will produce how many units per week, Why?
b. At what price would the firm earn a zero economic profit in the short-run? Why?
c. If the price the firm faces for it’s product is $6 per unit. What should the firm do?
d. Assume the price of the firm’s product in Exhibit 1 is $10 per unit. The maximum profit the firm earns is? Why?
Suppose the shirts industry is perfectly competitive and begins in a long-run equilibrium.
(a) Pluto Company invents a new production process that reduces the production cost. What happens to Pluto Company’s profits and the price of shirts in the short run when Pluto Company’s patent prevents other firms from using the new technology?
(b) What happens in the long run when the patent expires and other firms are free to use the technology?
Chapter 8 Solutions
Economics For Today
Ch. 8.5 - Prob. 1YTECh. 8.5 - Prob. 2YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQP
Ch. 8 - Prob. 9SQPCh. 8 - Prob. 10SQPCh. 8 - Prob. 11SQPCh. 8 - Prob. 12SQPCh. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Consider the perfectly competitive market for tofu. Many people use tofu as a substitute for meat. Starting from long-run equilibrium, show graphically what happens in the short and long run to q. Q, P, and in the market for tofu (in comparison to the starting point) if the price of meat is increasing.arrow_forwardWhat is the main feature of a perfect competitive market. Explain in long sentences.arrow_forwardShow the competitive firm in long run equilibrium and describe productive and allocative efficiency. Demonstrate what happens to equilibrium price and quantity with an increase in market demand. Can the firm make economic profit in the short run? What about the long run?arrow_forward
- In the long run, a perfectly competitive firm canarrow_forwardJo sells beautiful flower bouquets at the Sunday markets. Assume the market for flower bouquets is perfectly competitive. Jo sells her bouquets at the market price of $50. At the profit-maximising level of 57 bouquets, Jo's average total cost is $41 per bouquet. The minimum average variable cost is $38 per bouquet. Answer the following questions: a. Jo's economic profit or loss is dollars. (use a negative value if a loss). Answer in b. State whether the following statement is true or false: "At the profit-maximising quantity, Jo is making an economic profit of $9 per bouquet." Type T for true, or F for false c. State whether the following statement is true or false: "Jo should shut down if the market price is $40 per bouquet." Type T for true, or F for falsearrow_forwardA perfectly competitive market arises when A) there are few buyers and many sellers. B) each of the many firms produces a slightly different product. C) there are many buyers and few sellers. D) there are many buyers and sellers.arrow_forward
- The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical axis (quantity-0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to drawit. To refer to the graphing tutorial for this question type, please click here Price and cost 18 15 14 13 12 10 19/21 SUBMIT ANSWER 13 OF 21 QUESTIONS C OMPLETED 28 MacBook Pro 금□ F7 F8 F9 F1o F2 F3 F5arrow_forwardIn the long-run equilibrium in a perfectly competitive market,: a . the firms make an economic profit . b. the firms' owners make a normal profit . C. the average total cost is maximized . d . marginal cost is at a minimum .arrow_forwardSuppose the competitive market price is $60, and a competitive firm’s total costs = q^2 - 6q + 990 and marginal cost = 2q - 6. a. Solve for the profit-maximizing (or loss minimizing) quantity (q*). b. What is the market equilibrium price? c. Should the competitive firm produce q*? Explain why using one of the four key questions and solutions. d. Does the competitive firm make a profit? Explain why using one of the four key questions and solutions. e. How much profit (or loss) does the competitive firm make?arrow_forward
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