Assume that the plum market has lots of different farms. They are producing pretty much the same product. The plum market is very much like a
A capitalist interested in the California plum market has asked you for an analysis. The capitalist comments, “I am guessing that plums are going to increase in popularity. What does that mean in the market?" Help this capitalist understand what might happen in this market given that plums will experience an increase in popularity. Please apply the perfect competition model.
b. In the long-run, what do you think will happen in the plum market? Why? Don't forget to use perfect competition diagram(s) when explaining it.
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- Suppose a corn dog stand market is perfectly competitive and in long-run equilibrium. One day, the city starts imposing a $300 per year tax on each stand. How does this policy impact the number of corn dogs produced and sold in the market in the short run and long run? Down in the short run and no change in the long run No change in the short run and down in the long run Up in the short run and no change in the long run No change in the short run and up in the long runarrow_forwardthen, plot the supply curve and equilibrium on the second photoarrow_forwardIn competitive markets, there are many small firms with each firm unable to influence the market price. Suppose company ABX operates in the wheat market. The company produces and markets wheats at a Price = $20 per container. The firm’s total costs are given as: TC = 50 +2Q + 3Q2 What level of output should the firm produce? Hint: Set P = MC and solve for Q. Use a graph to show your answers as wellarrow_forward
- Assume that the plum market has lots of different farms. They are producing pretty much the same product. The plum market is very much like a perfectly competitive market. When answering this question, please use an explanation in words and the diagrams of the perfect competition model. A capitalist interested in the California plum market has asked you for an analysis. The capitalist comments, “I am guessing that plums are going to increase in popularity. What does that mean in the market?" Help this capitalist understand what might happen in this market given that plums will experience an increase in popularity. Please apply the perfect competition model. c. What happens to efficiency during these market changes? Please explain.arrow_forwardSuppose that you have a management job at a firm like Estrella River Ranch, a beautiful vineyard and one of more than 200 vineyards growing cabernet sauvignon grapes in California. Assume that the market is perfectly competitive. Also, assume that you cannot instantly change production when demand changes, and grapes cannot be stored, so your firm must sell all of the grapes it grows. The adjacent figure (Figure A) shows the situation at your California vineyard. If demand is high, the price is $3,000 per ton of grapes, and if the price is low, the price is $1,000 per ton of grapes. Producing 300 tons of grapes maximizes your firm's expected profit. Suppose that there is no fixed cost. If demand is high and your firm produces 300 tons of grapes, its economic profit on the tons of grapes between 100 and 300 tons is $ If demand is low and your firm produces 300 tons of grapes, its economic loss on the tons of grapes between 100 and 300 tons is dollars. (Enter a negtive sign to indicate a…arrow_forwardInitially, all firms in a perfectly competitive market are in long-run equilibrium. Assume that the market demand for the product produced by the firms in the market suddenly rises. Suppose the following graph shows the marginal revenue (MR) and marginal cost (MC) curves of a firm in this market at its initial long-run equilibrium, with an equilibrium price of P₁ and a profit-maximizing quantity of output of Q₁. Show the short-run effect of the increase in market demand on this firm by shifting the marginal revenue curve, the marginal cost curve, or both on the following graph. PRICE AND COST 2 MC Q₂ QUANTITY In the short run, the firm will respond by producing In the long run, some firms will respond by PRICE MR QUANTITY Supply MR Demand O Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects and the new long-run equilibrium after firms finish adjusting to the increase in market demand. MC the industry. Demand goods and…arrow_forward
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- you've been learning about what makes a market perfectly competitive, how a firm in a perfectly competitive market makes profit-maximizing decisions, and how a perfectly competitive market moves towards equilibirium. But how applicable is this to real life? For this discussion, try to think of a market (for a product or service) that is perfectly competitive or very close to it. What characteristics of the market make it like perfect competition? Are there factors that keep it from being perfectly competitive? If so, what are they? How close do you think the firms in this market are to perfectly competitive firms in choosing equilibrium price and quantity?arrow_forwardSuppose the market for peaches is perfectly competitive. The short-run average total cost and marginal cost of growing peaches for an individual grower are illustrated in the figure to the right. Assume that the market price for peaches is $30.00 per box. What is the profit-maximizing quantity for peach growers to produce? boxes. (Enter your response as an integer.) At this level of output, profit will be $. (Enter your response rounded to the nearest dollar.) Peach growers will earn positive economic profit in the short run at any market price above $ per box. (Enter your response rounded to one decimal place.) Price (dollars per box) 40- 36- 32- 28- 24 20 16- 12- 8 4- 10 MC 20 30 40 50 60 70 80 Output (boxes of peaches per day) ▬▬ ATC 90 100 Qarrow_forwardProductive efficiency and allocative efficiency are two concepts achieved in the long run in a perfectly competitive market. These are the two reasons why we call them “perfect.” How would you use these two concepts to analyze other market structures and label them “imperfect?”arrow_forward
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