In a perfectly competitive model a) economies of scale are large relative to the size of the market since average costs rise rapidly if a firm increases output beyond a relatively large amount. b) economies of scale are large relative to the size of the market since average costs remain constant if a firm increases output beyond a relatively large amount. c) economies of scale are small relative to the size of the market since average costs rise rapidly if a firm increases output beyond a relatively small amount. d) economies of scale are small relative to the size of the market since average costs remain constant if n firm increases output beyond a relatively small amount.

Suppose a typical (representative) corn farm has a short run production technology which results in the outcome of U-shaped Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC). Further, suppose this firm sells its product in a market where the price of the good is determined by the interaction of market Demand and Supply. Because an individual firm is very small compared to the rest of the market, we treat the market price as the price given to the firm, and the individual firm cannot impact that price.  assume we are in the Short Run for this firm. In graphing, put $ on the vertical axis and lower-case q (firm output) on the horizontal axis.    Start with the AFC0, AVC0, ATC0, and MC0 curves . show shifts in any of the cost curves, reflecting the higher cost of land (keeping in mind that this higher cost is independent of how much or how little corn is actually produced) and labeling the changed cost curves with a subscript 1. On the graph with $ on the…

What is the term for the lowest level of output at which a firm's goods are produced at minimum long-run average total cost? the point of diminishing returns the minimum total product the minimum efficient scale the point of zero marginal cost

If the market price of a product is $10 that lie between the minimum average variable cost $8 (AVC) and minimum average total cost $15 (ATC) of a firm, that firm will:___________ a) always shut down. b) always continue to produce.c) produce in the short run but shut down in the long run. d) produce in the long run but shut down in the short run. e) make positive economic profits.

Show full answers and steps to part a) b) & c)

The implications of diminishing marginal returns is that: Group of answer choices beyond some point, the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. because of economies and diseconomies of scale, a competitive firm's long-run average total cost curve will be U-shaped. the demand for goods produced by purely competitive industries is downsloping.

The following figures depict the market supply and demand curves for a constant cost, competitive industry (left) and the per unit cost curves for a typical firm (right). For parts (a) and (c), below, you can again include your answers directly on the graph. A) Identify the short-run equilibrium in this market, indicating the price, aggregate quantity and the amount supplied by an individual firm. b) Explain why it is not a long-run equilibrium. c) Explain how the market would adjust to an equilibrium in the long-run

Increasing returns and imperfect competition: (a) The production function for the word processor is Y = X – 100 million if X is larger than 100 million, and zero otherwise. By spending $100 million, you create the first copy, and then $1 must be spent distributing it (say for the DVD it comes on). For each dollar spent over this amount, you can create another copy of the software. (b) The production function is plotted in Figure 6.5. Output is zero whenever X is less than 100 million. Does this production function exhibit increasing returns? Yes. We spend $100 million (plus $1) to get the first copy, but doubling our spending will lead to 100 million copies (plus 2). So there is a huge degree of increasing returns here. Graphically, this can be seen by noting that the production function “curves up” starting from an input of zero, a common characteristic of production functions exhibiting increasing returns. (Constant returns would be a straight line starting…

Suppose a firm’s short-run cost curves were found to be: Total Cost = SRTC = 1 + 2Q + Q2 Marginal Cost = SRMC = 2 + 2Q, Where Q is output. Assume the firm behaves as a price taker and sells its output at P = K8 per unit. (a) If the firm maximizes profits, how much will it produce? (b) What are the marginal, average and total cost at that point? (c) What is the firms’ profit?