How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

Question

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Answer 1

Question

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

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Answer 2

Question

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

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Answer 3

Question

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

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Answer 5

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Answer 6

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Answer 7

Chapter 67, Problem 1CYU

a)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

Answer 8

a)

Expert Solution

Explanation of Solution

The average total cost curve is shifted upward by an increase in fixed costs and prices that are below the average total cost cause businesses to lose money immediately. Long-term demand curves for the businesses will shift to the right as companies exit the market since each one now services a larger percentage of the market. Long-run equilibrium is once more attained when the demand curve for each surviving firm has shifted rightward to the point where it is tangent to the firm's new, higher average total cost curve. Since each firm's average cost is currently equal to its price, no firm is currently making a profit.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Answer 13

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Answer 14

b)

To determine

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

Answer 15

b)

Expert Solution

Explanation of Solution

The average total cost curve and the marginal cost curve both move lower as marginal costs decline because businesses make money economically in the short term. The profit will eventually draw new competitors into the market due to which with the reduction in market share for each existing firm, the demand curves of those firms move to the left. When each firm's demand curve has moved to the left until it is tangent to the new, lower average total cost curve, long-run equilibrium is once again restored. At this point, the average total cost is just equal to the price charged by each firm, and no profit is made.

Answer 16

b)

Expert Solution

Answer 17

b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Introduction: Monopolistic competition refers to an imperfect competition where multiple manufacturers compete with one another yet sell distinct products that are not exact substitutes. Equilibrium is a situation where price and quantity variables of economic forces are equal to each other.

Answer 20

Ch. 67 - Prob. 1CYU Ch. 67 - Prob. 2CYU Ch. 67 - Prob. 3CYU Ch. 67 - Prob. 1MCQ Ch. 67 - Prob. 2MCQ Ch. 67 - Prob. 3MCQ Ch. 67 - Prob. 4MCQ Ch. 67 - Prob. 5MCQ Ch. 67 - Prob. 6MCQ Ch. 67 - Prob. 7MCQ

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change increases fixed cost for every firm in this industry.

Explanation of Solution

How an industry got affected in the short run and adjusts to a new long-run equilibrium when a technological change decreases the marginal cost for every firm in the industry.

Explanation of Solution

Want to see more full solutions like this?

Chapter 67 Solutions