Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2TY
To determine
The difference between the short-run and the long-run equilibrium of a
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In a perfectly competitive market, how do we go
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equilibrium?
must each perfectly competitive firm be in equilibrium if the industry is in the long-run equilibrium? why?
The market for corn is perfectly competitive and all firms are in long-run equilibrium currently. What will happen in the market if the incomes of corn consumers rise, assuming corn is an inferior good? Use two appropriately labelled graphs of the market and the individual perfectly competitive firm to explain.
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Economics: Principles & Policy
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- According to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?arrow_forwardHow does the equilibrium of the perfectly competitive firm differ from the equilibrium of the industry?arrow_forwardDraw a diagram for a perfectly competitive industry with firms earning normal profits in the long run. Assume that all firms in the industry use oil as key inputs. Using an appropriate diagram, illustrate an increase in the price of inputs. Will firm-level profits increase or decrease and will market supply increase or decrease? Also, it asks for perfect competition and graphs to include in this answer.arrow_forward
- Give an example of a firm which competes in a competitive market. Explain. Suppose that the this market begins in long run equilibrium. Give an example of a factor that would cause the demand curve in this market to shift to the left. How will the market return to the long run equilibrium?arrow_forwardDraw the long-run equilibrium graph for a perfectly competitive firm. Be sure to label the quantity Q*, the price P*, the average cost per unit ATC*, and shade any profit or loss region (if there is one!).arrow_forwardConsider the perfectly competitive market for tofu. Tofu production requires special inspections because of potential allergic reactions in consumers. Starting from long-run equilibrium, show graphically what happens in the short and long run to q. Q, P, and it in the market for tofu (in comparison to the starting point) if the US government decides to impose less stringent inspection requirements before any production can actually start.arrow_forward
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