Microeconomics
21st Edition
ISBN: 9781259915727
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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Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the
same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.
COSTS (Dollars per pound)
80
72
64
56
co
o
32
+
16
8
0
0
4
MC
0
ATC
AVC
8 12 16 20 24 28
QUANTITY (Thousands of pounds)
32
38, 72
36
40
Ⓒ
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)
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