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- Suppose a competitive market is comprised of firms that face identical cost curves. The firms experience an increase in demand that results in positive profits for the firms. Which of the following events are then most likely to occur? (i) New firms will enter the market. In the short run, price will rise; in the long run, price will rise further. In the long run, all firms will be producing at their efficient scale. a. (i), (ii) and (iii) b. (i) and (iii) only c. (i) and (ii) only d. (ii) and (iii) onlyA perfectly competitive market is in a long-run equilibrium. Prices of variable inputs for the typical firm decrease. Describe what will happen in the short run, to the typical firm’s marginal costs, average fixed costs, average costs, profits, and production as the firm makes its choices. In each case, describe why those changes take place. Describe exactly why the firm decides to make changes. As part of that discussion, summarize what happens in the market and how those changes relate to the typical firm. You do not need to discuss why the changes take place in the market. Outline in several sentences what will happen in the long run to the typical firm and the market.In a perfectly competitive market a firm produces where equals to . If MR is greater than MC, the firm should production. and if MR is less than MC, the firm should production.
- Malaysia is the world's largest producer of rubber gloves. The Rubber gloves industry is perceived as a highly competitive industry. Explain in detail how rubber glove manufacturers are able to increase their production in the short-run and long run.You witnessed new firms entering a competitive market. What can you infer for the existing firms in that market?If all the apple orchards in the United States are earning zero economic profits, the apple market is in long-run ___________.
- What is the equilibrium or profit-maximizing quantity of production for a perfectly competitive firm?1) Graphite is an input into the production of pencils. If the pencil market is perfectly competitive, then in the short-run an increase in the price of graphite will cause: (a) The supply curve for pencils to shift up: True or False? (b) An increase in the market price for pencils. True or False? (c) The demand curve for pencils to shift down. True or False? For each of (a), (b), and (c) above, indicate whether the statement is True or False? Explain each briefly. Provide a graph illustrating your answer(a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).
- A highly competitive market is made up of 100 identical firms. Each firm has a short-run marginal cost function as follows: MC = 10 + q, where q represents units of output per unit of time. The firm's average variable cost curve intersects the marginal cost at a vertical distance of 10 above the horizontal axis. Given the market short-run supply curve: MC= aQ + b where Q is market output Solve for a: __1__ Solve for b: __2__ What is the price that would make 500 units forthcoming per time period? __3__For each of the following events identify which of the determinates of demand or supply are affected. Also indicate whether demand or supply is increased or decreased. Why? A stock market crash lowers people’s wealth. Batelco increases the prices of mobile services. Diminishing returns mean rising costs while economies of scale mean falling costs. Therefore, a firm cannot be facing both diminishing returns and economies of scale. Do you agree? Why or why not?In the long run, in a competitive economy, companies use resources until the extra or marginal production costs are: 1. Less than the price of the product 2. Greater than the price of the product 3. Equal to the price of the product 4. Equal to your earnings
