2. Discuss the following statement: 'In the real world there is no industry which conforms precisely to the economist's model of perfect competition. This means that the model is of little practical value'.
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- 3) What assumptions in the perfect competition model ensure that economic profit is zero in the long run? Explain.2. "Assuming gator farming is perfectly compettive; explain the long-run competitive equilibrium condition for the typical gator farmer and the industry as a whole."a. Calculate profit for each quantity. How much should the firm produce to maximize profut ? b. Calculate marginal revenue and marginal cost for each quantity. Graph them. (Hint: Put the points between whole numbers. For example, the marginal cost between 2 and 3 should be graphed at ) At what quantity do these curves cross? How does this relate to your answer to part (a)? c. Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium?
- Which of the following is true? 1) Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. 2) The model of perfect competition is a good example of the old adage, "That's O.K. in theory, but not in practice." 3) Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. 4) The model of perfect competition comes very close to describing the real world.3. Why a competitive firm is price taker? Explain graphically why perfect competition is preferable to consumers?multiple choice Assume that the tuna fishing industry is perfectly competitive. Which of the following best characterizes the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna? 1- a constant-cost industry 2- a fixed-cost industry 3- a decreasing-cost industry 4- an increasing-cost industry
- Heloise and Abelard produce letters in a perfectly competitive industry. Heloise is much better at it than Abelard: On average, she produces letters for half of the cost of Abelard's. a. True or False: If Heloise and Abelard are both maximizing profit, the last letter that Heloise produces will cost half as much as the last letter written by Abelard. Explain your answer. b. Suppose Heloise and Abelard both produce until their last letter costs them $5 to produce. True or False: Because the cost of their last letter is the same, nobody will earn any economic rent.4. Suppose that each firm in a competitive industry has the following costs: Total cost: TC = 50 +÷q? Marginal cost: MC = q; where q is an individual firm's quantity produced. The market demand curve for this product is Demand: Demand: QD = 120 – P , where P is the price and Q is the total quantity of the good in the market. Currently, there are 9 firms in the market. In each following question, please explain how you find the answer! 4.1 What is the equilibrium price and quantity for this market in the short run? 4.2 In this equilibrium, how much does cach firm produce? Calculate cach firm's profit or loss. Is there incentive for firms to enter or exit? 4.3 In the long run with free entry and exit, what is the equilibrium price and quantity in this market? 4.4 In this long-run equilibrium, how much does each firm produce? How many firms are in the market?1. In perfect competition, price equals marginal cost. Why is this not possible when there are internal economies of scale?
- 2. List the conditions needed for pure competition to exist ?MC ATC 24 P = MR 20 18 4 100 350 500 700 q Bales of hay from the graph of a perfectly competitive firm above, answer the following questions:# 1. What is the profit maximization level of of output? ( 2. What is the value of ATC at the best level of output? 3. what is the amount of profit the firm makes at that level of output? show your calculations. 4. At what price firm will breakeven В I2. Consider the following economic scenario: A new korean restaurant opens in a city. People are initially cautious about eating new food items, until an influential health report warns consumers against grilled meat and suggest that they increase their consumption of Korean foods. As a result, demand for Korean cuisine increases dramatically. Assuming that the market for Korean food is perfectly competitive, answer the questions below. a. In the story above, what should have happened to the short-run economic profit of the Korean restaurant as a result of the health report? b. Assuming that demand remains high, what do you anticipate will happen to the number of korean restaurants in the city over the long run? c. Would you predict that the first korean restaurant would be able to sustain positive economic profit over the long run? Explain your answer. Using one graph of the market as a whole and one graph of a representative firm's cost curves, illustrate your answers to parts a - c.…