Micro Economics For Today
Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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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?
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