Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Question
Chapter 8.5, Problem 2YTE
To determine
The long-run equilibrium.
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The agricultural market for corn can be characterized as a purely competitive industry. How will an increase in the cost of fertilizer that is sold to corn farmers affect the short-run costs and output for a farm in the industry? How will this affect the profit of the individual farm?
In a long-run equilibrium in a perfectly competitive market, firms earn positive economic profits.
Is this true?
You witnessed new firms entering a competitive market. What can you infer for the existing firms in that market?
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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- Which of the following are characteristics of a perfectly competitive market? Check all that apply. There is a large number of firms in the market. Entry and exit are difficult. The product is homogeneous. There are very few firms. Does a Kansas wheat farmer operate in a perfectly competitive market structure? No, because there is no easy entry into or exit from the wheat market. Yes, because the wheat market conforms closely to the perfectly competitive market structure. No, because no real-world market closely fits the three assumptions of perfect competition. Yes, because there are very few wheat farms.arrow_forwardWhat assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important. Consider the market for wheat which is a perfectly competitive market. Is the market demand curve the same as the demand curve facing an individual producer? If not, explain how and why they are different? Lastly, of the following industries, which are perfectly competitive? For those that are not perfectly competitive, explain why. Restaurants Corn College education Local radio and televisionarrow_forwardGraphically show the market and firm graphs for the perfectly competitive long run market when firms exit the market to avoid a loss. Be sure to graphically indicate what is happening in both the market and for each individual firm. Your model should end in long run equilibrium.arrow_forward
- The graph below shows cost curves for a typical firm operating in a perfectly competitive market. Curve 1 represents Marginal Cost (MC), Curve 2 represents Average Variable Costs (AVC) and Curve 3 represents Average Total Costs (ATC). Suppose that the equilibrium price is $12. What will happen in this market in the long run? a. No new entry/no exit. b.Existing firms will exit. c.New firms will enter.arrow_forwardFabulous Farms operates in a perfectly competitive market. Which of the following is required for Fabulous Farms to both maximize profits and achieve allocative efficiency? A P = MC B P > MC C P < MC D P = MC – MRarrow_forwardb). The Philadelphia water ice industry is a constant cost industry. The demand for water ice shifts outward each year when it gets hot. What are the steps by which the competitive water ice market insures an increased amount of water ice. Explain and graph at the industry and firm levels. What is the long-run price of water ice?arrow_forward
- Draw a diagram for a perfectly competitive industry with firms earning normal profits in the long run. Assume that all firms in the industry use oil as key inputs. Using an appropriate diagram, illustrate an increase in the price of inputs. Will firm- level profits increase or decrease and will market supply increase or decrease?arrow_forwardA market in perfect competition is in long-run equilibrium. What happens to the market if labor unions are able to increase wages for workers? Include a detailed set of graphs showing both the market and firm long run equilibration in reaction to the change.arrow_forwardConsider the market for solar power. Assume the market is perfectly competitive and initially in long-run equilibrium; solar power sells for $.25 per kwh (kilowatt hour, a unit of power). Next, to encourage conservation, Congress taxes all forms of energy EXCEPT solar power, causing an increase in the demand for solar Show what happens to the market and the firm in the short run; indicate clearly what happens to price, quantity, and profit.arrow_forward
- In a perfectly competitive market, how do we go from a short run equilibrium to a long run equilibrium?arrow_forwardConsider the perfectly competitive market for tofu. Tofu production requires special inspections because of potential allergic reactions in consumers. Starting from long-run equilibrium, show graphically what happens in the short and long run to q. Q, P, and it in the market for tofu (in comparison to the starting point) if the US government decides to impose less stringent inspection requirements before any production can actually start.arrow_forward
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