Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Chapter 12, Problem 14P
To determine
(a)
The effect of rise in
To determine
(b)
The effect of industry's increasing demand on the price, MR and output of a
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Suppose the book-printing industry is a competitive market, and it begins with a long run competitive equilibrium.
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(b) What happens in the long run when the patent expires and other firms are free to use the technology?
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- The diagram above represents a perfectly competitive firm that faces a demand curve d. Answer the following questions. Show all calculations. From the diagram, how many units should this firm produce to maximize profit? From the diagram data, calculate the firm’s total profit. Assuming no changes in the costs of production, in the long run how much will this firm produce and at what price? From the diagram, at what price will this firm break even? From the diagram, at what price should this firm shut down?arrow_forwardUse a graph to demonstrate the scenario where a competitive firm would be earning positive profit in the short run. Can this scenario be maintained in the long run? Why? What are the ‘shutdown point’ and ‘break even point’ of a competitive firm . Explain with diagram. A competitive market starts in a situation of long run equilibrium. Then there is an increase in demand. Explain what happens in the short run and long run, using necessary diagrams.arrow_forwardAssume that the tofu industry is perfectly competitive and in the long run equilibrium. There is a technical innovation that is invented and pioneered by one tofu factory which results in a significant cost reduction in the production of tofu. Explain the effects of this innovation on the price of tofu and the profit of this tofu factory and the profit of the entire tofu industry in the short run. What will happen to the price of tofu, the profit of this tofu factory and the profit of entire tofu industry in the long run?arrow_forward
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