Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 9, Problem 7CQ
To determine
Shut down point of a perfect competitive firm.
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In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase the price until economic losses are zero. True False
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Microeconomics: Private and Public Choice (MindTap Course List)
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- Why do economists believe that economic profit is the more accurate measure of a business success? Why is economic profit the superior method of determining a business success?arrow_forwardDo you think firms really try to maximize profits? Do firms (especially small ones) know what prices they have to charge to maximize profits?arrow_forwardThe data in the following table give information about the price P (in dollars) for which a perfectly competitive firm can sell a unit of output and the total cost of production, where quantity is q, total cost is C, marginal cost is MC, total revenue is TR, marginal revenue is MR, and profit is . Fill in the blanks in the following table. (Enter your responses using integers.) q 0 1 Further, profit will 2 3 4 5 6 7 8 9 10 11 C 100 150 178 198 212 230 250 272 310 355 410 475 MC TR Show what happens to the firm's output choice and profit if the price of the product falls from $50 to $40. If the market price falls from $50 to $40, then the firm's output will from $ to $ from P = 50 MR (Enter your responses using integers.) units to π TR P = 40 MR units. (Enter your responses using integers.) πarrow_forward
- The figure below represents the short-run curves for TK Ltd, a popular Chinese cuisine restaurant. Answer the questions below. What market structure do you think TK Ltd is in? Explain using the characteristics of the market structure. What price does TK Ltd charge and what quantity does the firm produce to maximize profit or loss? Calculate this firm’s profit or loss. If this is a typical firm in the market, what do you think will happen to market supply and profit for this industry in the long run? Briefly explainarrow_forwardSuppose the market for apples is perfectly competitive. The short-run average total cost and marginal cost of growing apples for an individual grower are illustrated in the figure to the right. 40- 36- Assume that the market price for apples is $26.00 per box. What is the 32- MC profit-maximizing quantity for apple growers to produce? 75 boxes. 28- (Enter your response as an integer.) 24- At this level of output, profit will be $ 1950. (Enter your response rounded to the nearest dollar.) 20- ATC 16- 12- 8- 4- 10 20 30 40 50 60 70 80 90 100 Output (boxes of apples per day) Price (dollars per box)arrow_forwardYou read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The equilibrium output in agricultural markets based on what happens to the price given the change in supply, what do you think will happen to the equilibrium quantity? Will it remain the same, increase or decrease?arrow_forward
- Strictly speaking, pure competition is relatively rare. Then why study it?arrow_forwardSuppose the book-printing industry is competitive and begins in a long-run equilibrium. Then Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. Suppose Hi-Tech's patent prevents other firms from using the new technology. Which of the following statements are true about what happens in the short run? Check all that apply. Hi-Tech's marginal-cost curve remains the same. Hi-Tech's profits increase. The price of books remains the same. Hi-Tech's average-total-cost curve shifts downward.arrow_forwardFirms always lose money in a long-run industry equilibrium, true or false?arrow_forward
- Suppose the market for apples is perfectly competitive. The short-run average total cost and marginal cost of growing apples for an individual grower are illustrated in the figure to the right. 40- 36 Assume that the market price for apples is $26.00 per box. What is the profit-maximizing quantity for apple growers to produce? 75 boxes. (Enter your response as an integer.) 32 MC 28 At this level of output, profit will be S 900. (Enter your response rounded to the nearest dollar.) Apple growers will earn positive economic profit in the short run at any market price above $ per box. (Enter your response rounded to one decimal 20- place.) ATO 12- 20 30 40 so 80 70 ao 90 100 Output (boxes of apples per day) (xoq jəd sejop) soarrow_forwardConsider two perfectly competitive industries, A and B, both operating in a state of long-run equilibrium and subject to constant returns to scale. Now let consumers' preferences change: more demand is directed to industry A and less to B. Give an explanation of what will happen (a) in the short run, and (b) in the long run. (Describe and explain the shifts that will occur in the relevant curves.) HTML Editor B IUA A I E E = E E X 三E D ¶ 1 12pt Paragraparrow_forwardSuppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry, increased 208% last year as demand for corn‑based ethanol fuel increased. What do you expect to happen in the long run for the corn industry given this recent success? A. The price per bushel of corn will continue to increase, yielding higher profits. Thus, more firms will enter the market indefinitely. B. Profits will become negative due to overfarming, which will result in the corn farming industry going under. C. Profits will be equal to zero. D. None of the above. Suppose the firms in the market for bacon, also a perfectly (or purely) competitive industry, experienced losses last quarter due to people becoming increasingly concerned about how high-fat diets negatively impact health. What do you expect to happen in the long run for the bacon industry? A. Seeing this as an opportunity to monopolize a fledging industry, firms will enter the industry, shifting…arrow_forward
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