EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9781305465626
Author: Blinder
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 11, Problem 2DQ
To determine
The impact of investing in a competitive firm.
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Explain why the firm will still operate in the market if the economic profits are equal to zero. Use the graph to support your answer.
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In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?
Chapter 11 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- Use the table Costs for Alina's Apple Pies. If Alina's Apple Pies operates in a perfectly competitive market and the market price for a pie is $18, how many pies should Alina's Apple Pies produce and what is the economic profit or loss per unit?arrow_forwardYou witnessed new firms entering a competitive market. What can you infer for the existing firms in that market?arrow_forwardThe number of firms in an industry is not always a good indicator of the extent to which that industry is competitive.” Do you agree with this statement?arrow_forward
- News reports from the western United States occasionally report incidents of cattle ranchers slaughtering many newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profit-maximizing "firms," explain what economic factors may influence such behavior. Justify your answer.arrow_forward"the economic model of perfectly competitive market is very unrealistic because it predicts that firms in a perfectly competitive market earn zero profits in the long run. However, in reality, no firm would stay in business if it earned no profits." agree or disagree? explain.arrow_forwardWhat two lines determine whether a firm is making positive or negative or zero profits?arrow_forward
- We expect that firms in perfectly competitive markets can earn higher economic profits in the short run but will only earn normal profit in the long run. Why do we expect perfectly competitive firms to be unable to earn high economic profit in the long run? The inability of perfectly competitive firms to earn high economic profit in the long run is dependent on there being low barriers to entry in perfectly competitive markets. Explain why this is the case. Why do firms remain in business if they cannot earn economic profit?arrow_forward1. Suppose you are the owner of a burger restaurant that has a cost of production given by C = 400 + 0.02q^2 where q is the number of burgers produced per day. Assume that the market for burgers is perfectly competitive. a. If the market price for a burger is $10, how many burgers should the manager plan to produce in a day? b. What is the profit level? Is this the maximum profit that the restaurant can make per day? c. What output will the firm produce if the price of a burger goes down to $8?arrow_forwardBall Bearings, Inc., faces costs of production as follows: Total Fixed Costs Total Variable Costs Quantity (Dollars) (Dollars) 100 1 100 50 100 70 3 100 90 4 100 140 100 200 6. 100 360 Complete the following table by calculating the company's total cost, marginal cost, average fixed cost, average variable cost, and average total cost at each level of production. Total Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost Quantity (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) 1 2 3 4arrow_forward
- Based on the given graph:a. If this firm profit-maximizes, how much output will it produce and what price will it charge? b. When this firm profit maximizes, what (compute) is the firm’s profit or loss? Is this firm in a short run or long run equilibrium? Why? c. Does the firm minimize cost? Why or why not? How much excess capacity does this firm have?arrow_forwardQuestion:Imagine that you set up your own business. Assume that your firm produces a single product. Please discuss in detail whether the market for your product satisfies the basic assumptions of perfectly competitive markets one by one.arrow_forward2, The condition for profit maximization in the short run is to equate short-run marginal cost with short-run marginal revenue (assuming something is produced) How does this lead the firm to produce a given level of output? Briefly for managerial economics classarrow_forward
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