Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 11, Problem 3RQ
To determine
Find out the shape of the supply curve in the long run for decreasing cost firm.
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Suppose that bicycles are produced by a perfectly competitive, constant-cost industryWhich of the following will have a larger effect the long-run price of bicycles: a government program to advertise the health benefits of bicyclingor (2) a government program increases the demand for steel, an input in the manufacture of bicycles that is produced in an increasing cost industry ?
O. Option 1: shifts the demand curve out and increases the price.
O. Option 2: shifts the supply curve up and increases the price
O. Option 2: it shifts the demand curve up and increases the quantity.
O. Option 2: shifts the supply curve up and increases the quantity.
. (Figure 8.17) Initially, the constant-cost industry was in long-run equilibrium at point A when the demand for the good increased to D₂. How much output will be produced in the
long run as a result of the demand increase?
Price (S)
10-
8-
7
6-
5-
4
3-
2-
1-
O 3,000
O 5,000
O 6,000
O 7,000
8 9 10 Quantity (1,000)
The following graph plots the market demand curve for rhenium.
Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can
disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the
purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 30 firms.
PRICE (Dollars per pound)
80
72
64
56
48
40
32
24
16
8
Demand
0
0 120 240 360 480 800 720 840 980 1080 1200
QUANTITY (Thousands of pounds)
Because you know that competitive firms earn
Supply (10 firms)
Supply (20 firms)
If there were 30 firms in this market, the short-run equilibrium price of rhenium would be $
would
. Therefore, in the long run, firms would
True
Supply (30 firms)
False
per pound. From the graph, you can…
Chapter 11 Solutions
Economics (Irwin Economics)
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Similar questions
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