There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $21 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? 7 percent b. The other two dairies have a cost structure that generates profits of $24 for every $200 invested. What is their percentage rate of return? 12 percent c. Assuming that the normal rate of profit in the economy is 9 percent, and that firms cannot copy each other's technology, will there be entry or exit? Exit d. Will the change in the number of firms affect the two that earn $24 for every $200 invested? Yes, because those exiting firms will spread their technology. No, because those two firms are too small. No, because the exiting firms didn't belong in the industry. Yes, because those two firms can claim a larger market share. e. What will be the rate of return earned by most firms in the industry in long-run equilibrium? 9 percent f. If firms can copy each other's technology, what will be the rate of return eventually earned by all firms? 10 percent

There are 300 purely competitive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $21 for every $300 invested. Instructions: Enter your answers as a whole number. a. What is the percentage rate of return for these 298 dairies? 7 percent b. The other two dairies have a cost structure that generates profits of $24 for every $200 invested. What is their percentage rate of return? 12 percent c. Assuming that the normal rate of profit in the economy is 9 percent, and that firms cannot copy each other's technology, will there be entry or exit? Exit d. Will the change in the number of firms affect the two that earn $24 for every $200 invested? Yes, because those exiting firms will spread their technology. No, because those two firms are too small. No, because the exiting firms didn't belong in the industry. Yes, because those two firms can claim a larger market share. e. What will be the rate of return earned by most firms in the industry in long-run equilibrium? 9 percent f. If firms can copy each other's technology, what will be the rate of return eventually earned by all firms? 10 percent

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 15CQ

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