Answered: ncludes the firm’s dem

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter22: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 6CQ: Suppose that the development of a new drought-resistant hybrid seed corn leads to a 50 percent...

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Q2 (a). Assume apples are sold in a perfectly competitive market and firms are making zero economic profit. Explain and illustrate graphically, the effect of increase in market price on the short run position of a single firm selling ginger. (Hint: Make sure your graph includes the firm’s demand curve, marginal revenue curve, marginal cost curve and average total cost curve and also explain the profit maximising position of a firm)

Q2 (b). Based on the short run position identified in Q2 (a) explain and illustrate graphically effect of entry/exit on the long run position of the firm. (Hint: your answer should include graphs for both market as well as individual firm.)

To clarify, there are no values provided (no price change value etc.), the answers simply need to represent the concept of what would happen.

Thanks!

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