Managerial Economics
5th Edition
ISBN: 9781337681599
Author: Luke M. Froeb; Brian T. McCann; Michael R. Ward
Publisher: Cengage Limited
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Question
Chapter 9, Problem 9MC
To determine
Profit.
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Check out a sample textbook solutionStudents have asked these similar questions
a perfectly competitive market over the long run,
a. an increase in market demand or a decrease in firms' costs will lead to a decrease in the
number of firms operating within the market.
b. an improvement in production technology will increase profits at fust, but those profits
will be competed away over time as more firms enter the industry and reduce market price.
c. market price will equal maximum possible average total cost in long-run equilibrium.
d.
an increase in demand will cause the final market equilibrium to be at the original price but
at a lower output level.
1. The market for manicures and other nail treatments is very competitive. How would the following developments affect the number of nail treatments that a typical nail salon wants to supply in the short run?
a. Heightened concern about their appearance causes people to want more manicures at a given price.
b. The government requires all nail salons to pay a new yearly licensing fee to operate.
c. Worse job prospects elsewhere in the economy cause more people to want to become manicurists, causing the wages of manicurists to fall.
If firms can easily enter and exit a market, then
A. firms will earn zero economic profit in the short run.
B. firms will produce at minimum average fixed cost in the long run.
C. firms will produce where price is greater than marginal cost.
D. firms will produce where price is greater than marginal revenue.
E. firms will produce at minimum average cost in the long run.
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- In a competitive market with free entry and exit from the market a permanent rise in demand will lead to Select one or more: a. normal profits being made in the long-run b. excess profits being made in the short run (before new firms can enter) c. entry by new firms d. a permanent rise in pricesarrow_forwardIn a kinked demand market, whenever one firm decides to lower its price, A. other firms will automatically follow. B. none of the other firms will follow. C. one half of the firms follow, and one half of the firms don't follow the price cut. D. other firms all decide to exit the industry E. all the other firms raise their prices.arrow_forwardColumbia’s coffee producers operate in a perfectly competitive industry. The market price for a pound of coffee is determined by? A.the Columbian government. B.the intersection of world supply and world demand for coffee. C.the international coffee federation. D.Columbian coffee farmers.arrow_forward
- Consider a firm in a perfectly competitive market. If this firm were to raise its price, its a. revenue would fall dramatically b. profits would increase as long as costs remained constant C. total costs would increase revenue would increase only if market demand were inelastic e. revenue would decrease only if market demand were elasticarrow_forwardThe figures below show (on the left) two possible demand curves and (on the right) two possible supply curves in the perfectly competitive hamburger market. Price per hamburger 0 A B D₂ D₁ Hamburgers per month Price per hamburger 0 Select one: a. Movement along D₁ from Point A to Point B. b. Demand shifts from D₁ to D₂. F c. Movement along S₁ from Point F to Point G. d. Demand shifts from D₂ to D₁. G Hamburgers per month Assume that people consume either hamburgers or hot dogs. What will be the result of a decrease in the price of hot dogs? Hint: Are hamburgers and hotdogs complements or substitutes? S₂ S₁arrow_forwardBelow is a graphical illustration of a typical firm operating in a monopolistically competitive industry: P5 P4 P3 P2 P1 H Q1 Q2 Q3 Refer to the graph above to answe question. Which of the following statements is correct? ATC Sarrow_forward
- A Wall Street journal headline states: "a nation of snackers snubs old favorite: the beloved cookie" as u.s. consumers adopted more carbohydrate-conscious diets, the number of cookie boxes sold declined 5.4 percent that year, the third consecutive year of decline. a. Assuming the cookie industry is perfectly competitive demonstrate using market supply and demand curves the effect of this decline in demand on equilibrium price and quantity in the short run. b. Assuming a cookie form was in equilibrium before the change in demand, and it is a constant-cost industry, demonstrate the effect of the decline in equilibrium price for an individual cookie firm in the short run. c. How might your answer to question "a" if you are considering long run?arrow_forwardWhat is a price taker? A price taker is A. a firm with a perfectly inelastic demand curve. B. a firm that has the ability to charge a price greater than marginal cost. C. a firm that is unable to affect the market price. D. a firm that does not seek to maximize profits. E. a firm with a downward-sloping demand curve. When are firms likely to be price takers? A firm is likely to be a price taker when A. it has market power. B. firms in the industry collude. C. it sells a differentiated product. D. it represents a small fraction of the total market. E. barriers to entry are substantial.arrow_forwardConsider a perfectly competitive market. Currently the equilibrium price is above the minimum of Average Total Cost. This is likely to result in _____________ and ___________ in price. A. Decrease in market demand; decrease in price B. Increase in market demand; increase in price C. Increase in market supply; and decrease D. Decrease in market supply; and decrease E. Increase in market supply; and increase F. Decrease in market supply; and increasearrow_forward
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