Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 24, Problem 5E
To determine
To explain:
The effect of decline in market
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How we can understand the Long-run Normal price in increasing cost industry, and the Long-run Normal price in constant cost industry?
Using diagrams derive a long-run market supply curve for
a constant-cost industry,
a decreasing-cost industry.
Starting from long-run equilibrium in a perfectly competitive increasing-cost industry, show on a diagram the effect of price and quantity of an increase in demand in the market period, in the short run, and in the long run.
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- Illustrate and explain the shape of the Long Run Industry Supply Curve for a Decreasing Cost Industry.arrow_forwardTRUE OR FALSE? A decreasing cost industry has a long run supply curve that is upward sloping.arrow_forwardIn a perfectly competitive market, please compare the short run and long run prices in an increasing cost industry. Are they same? If yes, what drives the equal prices? If not, what is the main reason of that difference?arrow_forward
- The graph attached illustrates the Demand, Marginal Revenue, Marginal Costs, Average Total Costs and Average variable Cost curves for a firm in a perfectly competitive market. What is the breakeven price? Explain your answer. What is the shot down price? Explain your answer.arrow_forwardJuan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.) Total revenue is $120,000, Total fixed costs are $100,000 Total variable costs are $110,000 Marginal cost is $200/unit Quantity produced is 600 units What will you suggest to Juan? A: Shut down immediately B: Do not shut down and increase production C: Do not shut down but decrease production D: Do not shut down and do not change the current production level.arrow_forwardIn a perfectly competitive industry, what mechanism that adjusts price to minimum long-run average total cost?arrow_forward
- (a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).arrow_forwardIdentify an industry that enjoys perfect (or nearly perfect) competition. How do the competitors interact with each other and suppliers and customers?arrow_forwardPrice A B C A Cannot be determined C B The graph above depicts the demand, short-run industry supply curve and the long- run industry supply curve. Which line represents the long-run industry supply curve? Quantityarrow_forward
- Would independent trucking fit the characteristics of a perfectly competitive industry?arrow_forwardThe wheat industry is comprised of many firms producing an identical product. Market demand and supply conditions are indicated in the left-hand panel of the figure attached; the long-run cost curves of a wheat farmer are shown in the right-hand panel. Currently, the market price for wheat is $2 per pound, and at that price, consumers are purchasing 800,000 pounds of wheat per day. Using the graphs attached, answer the following: a. How many pounds of wheat will each farmer produce if they want to maximize profits? b. How many farmers are currently serving the industry (fractional numbers are fine)? c. In the long run, what will the equilibrium price of wheat be? Briefly explain your answer.arrow_forward
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