Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 8, Problem 8SQP
(a)
To determine
Economic profit or loss.
(b)
To determine
The
(c)
To determine
The demand curve which results in shutdown.
(d)
To determine
The short-run supply curve of the firm.
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Question 5:
The avocado growing industry in Chile is perfectly competitive, and each producer has a long-run
marginal cost curve given by MC (Q) = 50+5Q. The corresponding long-run average cost
function is given by AC' (Q) = 50 +3Q +22. The market demand curve is QD = 350 – 2P.
1. What is the long-run quantity produced by each firm?
2. What is the long-run equilibrium price in this industry?
3. How many active producers are in the avocado growing industry in the long-run competitive
market?
Consider Exhibit 7-11, which shows the graph of a perfectly competitive firm in the short run.
a) If the firm's demand curve is MR3, does the firm earn an economic profit or loss?
b) Which demand curve(s) indicate(s) the firm incurs a loss?
c) which demand curve(s) indicate(s) the firm would shut down?
d) Identify the firm's short-run supply curve.
Consider a perfectly competitive market that was in a long-run equilibrium when a
permanent increase in demand occurs. Which of the following will occur as a result?
i. The existing firms will start to earn an economic profit.
ii. New firms will be motivated to enter the market.
iii. Some firms that cannot meet the new demand will exit the market.
A) i and ii only
B) ii and ii only
C) i and iii
D) ii only
E) i, ii and ii
Chapter 8 Solutions
Micro Economics For Today
Ch. 8.5 - Prob. 1YTECh. 8.5 - Prob. 2YTECh. 8 - Prob. 1SQPCh. 8 - Prob. 2SQPCh. 8 - Prob. 3SQPCh. 8 - Prob. 4SQPCh. 8 - Prob. 5SQPCh. 8 - Prob. 6SQPCh. 8 - Prob. 7SQPCh. 8 - Prob. 8SQP
Ch. 8 - Prob. 9SQPCh. 8 - Prob. 10SQPCh. 8 - Prob. 11SQPCh. 8 - Prob. 12SQPCh. 8 - Prob. 1SQCh. 8 - Prob. 2SQCh. 8 - Prob. 3SQCh. 8 - Prob. 4SQCh. 8 - Prob. 5SQCh. 8 - Prob. 6SQCh. 8 - Prob. 7SQCh. 8 - Prob. 8SQCh. 8 - Prob. 9SQCh. 8 - Prob. 10SQCh. 8 - Prob. 11SQCh. 8 - Prob. 12SQCh. 8 - Prob. 13SQCh. 8 - Prob. 14SQCh. 8 - Prob. 15SQCh. 8 - Prob. 16SQCh. 8 - Prob. 17SQCh. 8 - Prob. 18SQCh. 8 - Prob. 19SQCh. 8 - Prob. 20SQ
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- QUESTION 10 In an increasing cost industry, the long-run market supply curve is because the long run is increasing. downward sloping; average variable cost (AC) upward sloping; fixed cost (FC) downward sloping; marginal cost (MC) upward sloping; average cost (AC) QUESTION 11 In the long run, each perfectly competitive firm has long run AC = 4+5Q+20/Q and MC=4+10Q. What is the long run equilibrium price P*? $20 $24 $4arrow_forwardUse the following information to answer Questions 1 and 2. The perfectly competitive market for kitchen knives is at a short-run equilibrium with P = $89 and Q = 8370. Firms in the industry are perfectly competitive, with 9° – 5q? + 17q+550. 1. What is the profit-maximizing level of output for each firm in the short run? Your answer should contain only numbers.arrow_forwardThe 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_forward
- The graph below shows a perfectly competitive firm in short run equilibrium, where the firm has chosen the output level maximizing its profit. Consider the level of profits being earned here, and what will happen over time. What will happen in the long run? Note that the horizontal demand curve, D1, is also equivalent to marginal revenue and price. Group of answer choices The market price will increase causing economic profits to increase Demand will increase causing economic profits to increase The market price will decrease until economic profit is zeroarrow_forwardThe graph below gives marginal costs (MC), average variable costs (AVC), and average total costs (ATC) for a firm. Note that marginal revenue (MR) is not shown. Suppose the firm operates in a perfectly competitive market and acts to maximize its profit. which of the following is/are true? I. At a price of 1.5, the firm will shut down in the short-run. II. At a price of 0.5, the firm will shut down in the short-run. III. At a price of 2.5, the firm will make a positive economic profit. 7 MC АТС AVC 3 2 1 1 Quantity 2. 4. Pricearrow_forwardQuestion 5: The avocado growing industry in Chile is perfectly competitive, and each producer has a long-run marginal cost curve given by MC (Q) = 50 +5Q. The corresponding long-run average cost function is given by AC (Q) = 50+3Q+72. The market demand curve is QP = 350 - 2P. 1. What is the long-run quantity produced by each firm? 2. What is the long-run equilibrium price in this industry? 3. How many active producers are in the avocado growing industry in the long-run competitive market?arrow_forward
- Given the information in the table below for a firm in a perfectly competitive market: а. What is profit for this firm if price = $22? Make sure to give me a dollar amount rather than an output level. b. What is the short-run shut down price? What is the break-even price? С. Q MC AVC ATC ($) ($) ($) 40 12.50 12.50 35.00 100 8.33 10.00 19.00 130 16.66 11.53 18.46 150 25.00 13.33 19.33 160 50.00 15.62 21.25arrow_forwardA perfectly competitive firm is currently maximizing profits. The market for its product is in a long-run equilibrium. Market demand for the product decreases. Summarize what will happen in the market in the long run. Discuss the changes that will occur in the long run for the firm and explain why. You do not need to discuss why each cost changes, but do explain why the firm ends up where it does relative to where it was at the beginning and where it was in the short run.arrow_forwardA firm produces a product in a perfectly competitive industry and has a total cost function TC= 50+4q+2q². a. At the short-run market price of $20, the firm is producing 5 units of output. Is the firm maximizing its profit? Explain. b. What quantity of output will the firm produce in the long run, assuming there is no change in cost structure? What will be the long-run equilibrium price? c. Graphically depict the long-run equilibrium for an individual firm within this market.arrow_forward
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