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MCQ:
A
- Can decide what price to charge for its product
- Has to sell its product at the
market equilibrium price - Can charge different customers different prices
- None of the above
In a perfectly competitive industry,
- The market demand curve is downward sloping
- The market supply curve is upward sloping
- The firm’s demand curve is horizontal at the equilibrium price
- All of the above
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Solved in 3 steps
- er 11 i Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice OO O the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. 23 11,229 X OCT all Z AShort-run supply and long-run equilibrium Consiber the competitive market for rhodium. Assume that no matter how many firms operate in the induatry, every firm is identical and faces the same marpinal cost (MC), averapt total cost (ATC), and average variable cost (AVC ) curves plotted in the following praph. The following graph plots the market demand curve for thodium. If there were 10 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the rhodium market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True FalseSuppose that the market for chicken momos is perfectly competitive with ten firms producing momos. Tasty treat is one of the ten price-takers in the market for momos. The accompanying tables show the demand schedule for momos in Dhaka and cost schedule for "Tasty Treat". DEMAND SCHEDULE Price (BDT per plate) Quantity demanded (plate per hour) 10 900 25 675 30 600 40 450 50 300 70 0 COST SCHEDULE OF TASTY TREAT Output (plate per hour) Marginal Cost (BDT per extra plate) Average Variable Cost (BDT per plate) Average total cost (BDT per plate) 40 20 25 90 50 10 10 75 60 30 20 55 70 50 23 50 80 70 35 60 90 85 50 77 a) What is the value of the shut-down price and break-even price for Tasty Treat?How did you figure that out?b) Write down the individual supply schedule of chicken momos for Tasty Treat and the industry supply schedule for chicken momos.c) Plot the market demand and supply curves for chicken momos and find the equilibrium price and…
- ts dings Figure 12-17 Price (dollars per pound) Market price 5 4 3 2 0 10 20 30 Supply of apples Demand for apples 40 50 Quantity (thousands of pounds) Price and cost (dollars per pound) 5 Market 3 price 2 1 0 10 20 MC # 30 40 50 Quantity (thousands of pounds) The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. Refer to Figure 12-17. Which of the following statements is true? The current market price is $3 but the price will increase in the future as the market demand increases. The current market price is $3 but the price will fall in the long-run as a result of a decrease in demand. The current market price is $3 but the firm will be able to increase the price in the future. ATC D=MR The current market price is $3 but the price will fall in the long-run as new firms enter the market. hatC av G CH If p pe ec COS In a tak ma pro ave hav So, lessage ChatConsider 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). Draw2graphs, oneto represent the market (supply and demand), and one to represent asingle firm (demand, marginal cost, and average cost curves). Assume a u-shaped average cost Show the equilibrium price and the quantity produced by the market (Q) and by each individual firm (q).Economic profits in a perfectly competitive industry will encourage entry of new firms, which will shift the market supply curve to the left. OTrue OFalse
- a) What is the profit maximising condition in a market with perfect competition?b) Explain what is meant by abnormal profit? What is the adjustment process from short-run abnormal profit to long-run equilibrium in a perfectly competitive market?c) Please find below Pricing options for firm A and B, along with individual payoffs (Firm A’s payoff/Firm B’s payoff)Firm BFirm APrice £2 Price £1Price £2 £20,000/£20,000 £10,000/£24,000Price £1 £24,000/£10,000 £12,000/£12,000Assume you are the pricing manager at Firm A;i) What is your payoff for a ‘maximin’ strategy?ii) What is your payoff for a ‘maximax’ strategy?iii) Does a dominant strategy exist within this prisoners’ dilemma?ATC MC PA e AVC P3 P2 P1 8 10 11 12 Quantity (per day) The figure above shows a firm in a perfectly competitive market. If the industry price is between P2 and P3: Firm makes loss but produces because total revenue is greater than total variable cost. Firm makes loss but produces because total revenue is greater than total fixed cost. Firm makes profits because total revenue is greater than total cost. Firm shuts down production because loss from producing is greater than total fixed cost. Price and costs (dollars)The table below shows the total costs faced by Gregory's Jewelry firm for different quantities of necklaces sold. Quantity 0 1 2 3 4 5 6 7 8 9 10 Total Cost $64 $79 $98 $120 $145 $171 $198 $228 $262 $305 $353 Gregory's Jewelry firm sells necklaces in a perfectly competitive market with a downward sloping demand curve and an upward sloping supply curve. The market price is $32/unit. A. Calculate the average fixed cost of producing 8 units. Show your work. B. Identify the profit maximizing quantity. Explain using marginal analysis. C. Calculate the economic profit at the profit maximizing quantity you identified in Part B. Show your work. D. Based on your answer to Part C, will the number of firms in the industry increase, decrease, or stay the same in the long run? Explain. E. Based on your answer to Part C, will the market price increase, decrease, or stay the same in the long run? Explain. F. The income elasticity of demand for necklaces is -3 and the cross price elasticity of demand…
- Sparkle is one firm of many in the market for toothpaste, which is in long-run equilibrium. Indicate which of the following graphs accurately reflects Sparkle's demand curve, marginal-revenue (MR) curve, average-total-cost (ATC) curve, and marginal-cost (MC) curve. (?) ?) A B Demand Demand ATC ATC MC- MC- MR MR Quantity of Sparkle Toothpaste Quantity of Sparkle Toothpaste A B Price, Cost, Revenue Price, Cost, RevenueAnswer the question on the basis of the following demand and cost data for a specific firm Demand Data (2) Price $10.00 (1) Price $ 11.50 11.00 10.50 10.00 9.60 9.10 8.30 Multiple Choice O 10 units 11 units 9 units 8.85 8.00 7.00 6.10 5.00 4.15 8 units (3) Quantity 6 7 8 9 10 11 12 Output 6 7 8 9 10 Cost Data 11 12 If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be Total Cost $61 62 64 67 72 79 86Costs and revenue per case 50% a $14 $12 $22 $16 $13 Question 6 Costs and revenue 22 24 30 30 @ 300 The perfectly competitive price would be: MR 22 24 30 3 ATC Demand Quantly (cases) ATC Demand Quantity In the above graph, the firm would earn: $0 in economic profit and break even $44 economic profit $88 economic profit $22 economic loss $44 economic loss