Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Question
Chapter 9, Problem 9MC
To determine
Profit.
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Students have asked these similar questions
1. The market for manicures and other nail treatments is very competitive. How would the following developments affect the number of nail treatments that a typical nail salon wants to supply in the short run?
a. Heightened concern about their appearance causes people to want more manicures at a given price.
b. The government requires all nail salons to pay a new yearly licensing fee to operate.
c. Worse job prospects elsewhere in the economy cause more people to want to become manicurists, causing the wages of manicurists to fall.
a perfectly competitive market over the long run,
a. an increase in market demand or a decrease in firms' costs will lead to a decrease in the
number of firms operating within the market.
b. an improvement in production technology will increase profits at fust, but those profits
will be competed away over time as more firms enter the industry and reduce market price.
c. market price will equal maximum possible average total cost in long-run equilibrium.
d.
an increase in demand will cause the final market equilibrium to be at the original price but
at a lower output level.
The figure below depicts the market supply and demand for the perfectly competitive rollerblade industry.
S
Price per pair of
Rollerblades
1,140
070
50
150
Number of pairs of
Rollerblades per week
Based on the figure above, if the current quantity demanded of rollerblades is 150 per week, you accurately predict that in the short run,
Q
Select one:
a. price and quantity supplied will increase and quantity demanded will decrease.
b.
price and quantity supplied will decrease and quantity demanded will increase.
c. price, quantity supplied and quantity demanded will increase.
d. price, quantity supplied and quantity demanded will decrease.
Chapter 9 Solutions
Managerial Economics: A Problem Solving Approach
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- explain your answers in detail and use graphs whenever appropriate: The market for rental cars is very competitive. How would the following developments affect the quantity of car rentals that a typical rental car company wants to supply in the short run? a. With the easing of fears about Covid 19, people are more excited to travel than before. b. Local governments reduce the yearly fee that rental car companies have to pay for their facilities. Note, these fees do not vary with how many cars the company rents. c. Rental car companies have to pay higher wages for their workers. Suppose that initially the market for rental cars is in long-run equilibrium. a. What does the fall in the yearly fee rental car companies have to pay for their facilities do to the profits of a typical rental car company in the short run? b. What will happen to the equilibrium price and quantity of rental cars in the long run? Why? What will happen to the profits of a typical rental car company in the long run?arrow_forwardIf firms can easily enter and exit a market, then A. firms will earn zero economic profit in the short run. B. firms will produce at minimum average fixed cost in the long run. C. firms will produce where price is greater than marginal cost. D. firms will produce where price is greater than marginal revenue. E. firms will produce at minimum average cost in the long run.arrow_forwardIn a market this is highly competitive with little product differentiation and easy market entry, prices tend to be Group of answer choices a. Marginal b. Elastic c. Inelastic d. Staticarrow_forward
- In a competitive market with free entry and exit from the market a permanent rise in demand will lead to Select one or more: a. normal profits being made in the long-run b. excess profits being made in the short run (before new firms can enter) c. entry by new firms d. a permanent rise in pricesarrow_forwardIn a kinked demand market, whenever one firm decides to lower its price, A. other firms will automatically follow. B. none of the other firms will follow. C. one half of the firms follow, and one half of the firms don't follow the price cut. D. other firms all decide to exit the industry E. all the other firms raise their prices.arrow_forwardColumbia’s coffee producers operate in a perfectly competitive industry. The market price for a pound of coffee is determined by? A.the Columbian government. B.the intersection of world supply and world demand for coffee. C.the international coffee federation. D.Columbian coffee farmers.arrow_forward
- The figures below show (on the left) two possible demand curves and (on the right) two possible supply curves in the perfectly competitive hamburger market. Price per hamburger 0 B D₂ D₁ Hamburgers per month A Price per hamburger 0 F Select one: a. Movement along D₁ from Point A to Point B. b. Demand shifts from D₁ to D₂. c. Movement along S₁ from Point F to Point G. d. Demand shifts from D₂ to D₁. G S₂ S₁ Hamburgers per month Assume that people consume either hamburgers or hot dogs. What will be the result of a decrease in the price of hot dogs? Hint: Are hamburgers and hotdogs complements or substitutes?arrow_forwardBelow is a graphical illustration of a typical firm operating in a monopolistically competitive industry: P5 P4 P3 P2 P1 H Q1 Q2 Q3 Refer to the graph above to answe question. Which of the following statements is correct? ATC Sarrow_forwardConsider a perfectly competitive market. Currently the equilibrium price is above the minimum of Average Total Cost. This is likely to result in _____________ and ___________ in price. A. Decrease in market demand; decrease in price B. Increase in market demand; increase in price C. Increase in market supply; and decrease D. Decrease in market supply; and decrease E. Increase in market supply; and increase F. Decrease in market supply; and increasearrow_forward
- A Wall Street journal headline states: "a nation of snackers snubs old favorite: the beloved cookie" as u.s. consumers adopted more carbohydrate-conscious diets, the number of cookie boxes sold declined 5.4 percent that year, the third consecutive year of decline. a. Assuming the cookie industry is perfectly competitive demonstrate using market supply and demand curves the effect of this decline in demand on equilibrium price and quantity in the short run. b. Assuming a cookie form was in equilibrium before the change in demand, and it is a constant-cost industry, demonstrate the effect of the decline in equilibrium price for an individual cookie firm in the short run. c. How might your answer to question "a" if you are considering long run?arrow_forwardEdward Scahill produces table lamps in the perfectly competitive desk lamp market. The equilibrium price of lamps is $50. a. Fill in the blanks in the table for total revenue and marginal revenue, as represented by (i and ii). (Enter your responses as integers.) (1) Total revenue is $. (ii) Marginal revenue is $. b. How many table lamps will Edward produce to maximize profit? lamps. c. If next week the equilibrium price of desk lamps drops to $30, should Edward shut down? O A. Yes because he is not covering his fixed costs. OB. Yes because price is less than ATC. OC. No because price is greater than minimum AVC. D. No because he is covering his fixed costs and some of his AVC. Output per Total Costs Marginal week Cost 0 1 2 3 4 5 6 7 8 9 $120 150 170 185 195 215 260 310 385 495 $30 20 15 10 20 45 50 75 110 Total Marginal Revenue Revenue SO 50 100 (1) 200 250 300 350 400 450 $50 50 50 (if) 50 50 50 50 50arrow_forward. In Taiwan, there is only one beer producer, called Taiwan Beer. The Taiwanese government has passed a law prohibiting any other company from producing and selling beer in Taiwan. Suppose that the demand for beer in Taiwan increases. Explain what happens in the market for beer in Taiwan in the short run. Specifically, explain what happens to the price of beer, the number of beer producers, and the profits of beer producers. Explain what happens in the market for beer in Taiwan in the long run. Specifically, explain what happens to the price of beer, the number of beer producers, and the profits of beer producers. Explain who benefits and who is hurt by the government regulation granting Taiwan Beer a monopoly.arrow_forward
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