Principles of Economics (MindTap Course List)
8th Edition
ISBN: 9781305585126
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 14.3, Problem 3QQ
To determine
The price equal to marginal cost, average total cost , both, or neither in the long run.
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In the long run with free entry and exit, is the price in a market equal tomarginal cost, average total cost, both, or neither? Explain with a diagram.
Show the competitive firm in long run equilibrium and describe productive and allocative efficiency. Demonstrate what happens to equilibrium price and quantity with an increase in market demand. Can the firm make economic profit in the short run? What about the long run?
Productive efficiency and allocative efficiency are two concepts achieved in the long run in a perfectly competitive market. These are the two reasons why we call them “perfect.” How would you use these two concepts to analyze other market structures and label them “imperfect?”
Chapter 14 Solutions
Principles of Economics (MindTap Course List)
Ch. 14.1 - Prob. 1QQCh. 14.2 - How does a competitive firm determine its...Ch. 14.3 - Prob. 3QQCh. 14 - Prob. 1CQQCh. 14 - Prob. 2CQQCh. 14 - Prob. 3CQQCh. 14 - Prob. 4CQQCh. 14 - Prob. 5CQQCh. 14 - Prob. 6CQQCh. 14 - Prob. 1QR
Ch. 14 - Prob. 2QRCh. 14 - Prob. 3QRCh. 14 - Prob. 4QRCh. 14 - Prob. 5QRCh. 14 - Prob. 6QRCh. 14 - Prob. 7QRCh. 14 - Prob. 8QRCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - Prob. 4PACh. 14 - Prob. 5PACh. 14 - A firm in a competitive market receives 500 in...Ch. 14 - Prob. 7PACh. 14 - Prob. 8PACh. 14 - Prob. 9PACh. 14 - Prob. 10PACh. 14 - Suppose that each firm in a competitive industry...
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- Draw a market graph showing a downward-sloping demand curve and a horizontal supply curve. The firm graph would show a U-shaped average cost curve and a marginal cost curve that intersects the average cost curve at its minimum point. The firm would be producing at the profit-maximizing level of output, where marginal cost equals price.arrow_forwardSuppose the book-printing industry is a competitive market, and it begins with a long run competitive equilibrium. Over time, in the long run, what will happen to the market for bookprinting? Explain the process as much as the ultimate conditions in the market. No graph is required for part (c).arrow_forwardIn the long-run equilibrium of a competitive market with identical firms, what are the relationships among price (P), marginal cost (MC), and average total cost (ATC)?arrow_forward
- Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.arrow_forwardCan excess profit be earned in perfectly competitive markets in the long run. Explain.arrow_forwardSuppose Sam sells apples, picked from his apple tree, in a competitive market. Assume all apples are equal in quality, but grow at different heights on the tree. Sam, being fearful of heights, demands greater compensation the higher he goes: So for him, the cost of grabbing an apple rises higher and higher, the higher he must climb, as shown in the Total Cost column in the following table. The market price of an apple is $0.50. a. Does this suggest that the marginal cost of apples is increasing, decreasing, or staying the same as the quantity of apples picked increases? Why? b. Complete the table. c. How many apples does Sam pick?arrow_forward
- The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a. How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b. Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market. [Upload a picture] c. Assuming there is no change in either demand or the firms’ cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the marketarrow_forwardEvaluate and explain the following statement: The market system is a profit-and-loss system.arrow_forwardDo entry and exit occur in the short run, the long run, both, or neither?arrow_forward
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