Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 9.A, Problem 1P
To determine
The assumption of constant input prices.
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For each lettered space in the following table, determine the appropriate dollar amount (See the chart attached)
Assume that the above cost data is for a perfectly competitive firm. Using this data answer the following:
(a) If the market equilibrium price that this firm charges is $50, what level of output must this firm produce to maximize its profit?
(b) What would be the amount of profit that this firm would earn if it produced at the profit-maximizing level of output?
3. You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you
expect to happen over time (in the long run) to each of the following?
a. The prices of agricultural products
b. The profits of farmers
c. The equilibrium output in agricultural markets
d. The number of farms
4. Distinguish between economies of scale and diseconomies of scale. Give examples of why a…
Consider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
The following diagram shows the market demand for steel.
Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms.
If there were 10 firms in this market, the short-run equilibrium price of steel would be
per ton. At that price, firms in this industry would…
Consider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
The following diagram shows the market demand for steel.
Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms.
Chapter 9 Solutions
Principles of Economics (12th Edition)
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