Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 9.A, Problem 1P
To determine
The assumption of constant input prices.
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For each lettered space in the following table, determine the appropriate dollar amount (See the chart attached)
Assume that the above cost data is for a perfectly competitive firm. Using this data answer the following:
(a) If the market equilibrium price that this firm charges is $50, what level of output must this firm produce to maximize its profit?
(b) What would be the amount of profit that this firm would earn if it produced at the profit-maximizing level of output?
3. You 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?
a. The prices of agricultural products
b. The profits of farmers
c. The equilibrium output in agricultural markets
d. The number of farms
4. Distinguish between economies of scale and diseconomies of scale. Give examples of why a…
The demand curve and supply curve for carpet cleaning in the local market are currently as follows: Demand: Q = 1,000 - 1OP
Supply: Q = 640 + 2P
The total cost function for the typical carpet cleaning company is: TC= 75 + 3q2 (so that FC=75, VC=3q2 and MC= 6q), where costs are measured in dollars and q is output per year. The market is perfectly competitive.
First question how do I calculate the optimal output for the typical carpet cleaning firm in the short run and how many firms would operate in the market in the short run?
Second, how would I compute operating profits and total profits for the typical firm in the short run. Based on the results so far, would you say that this market is at the long-run equilibrium?
Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
The following diagram shows the market demand for titanium.
Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 40 firms.
If there were 20 firms in this market, the short-run equilibrium price of titanium would be $_______ per pound. At that price, firms in this…
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Principles of Economics (12th Edition)
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