Question

9. The market for pizza is perfectly competitive and has 1,000 firms. Each firm is identical. Describe each firm in long-run equilibrium. In long-run equilibrium, each firm is - O A. making zero economic profit OB. making positive economic profit C. incurring an economic loss OD. just covering total variable cost ID: 12.4 Test B 3 10. There are five firms in a market and the market shares of the firms are 35 percent, 25 percent, 20 percent, 15 percent, and 5 percent. What is the Herfindahl-Hirschman Index for this market? The Herfindahl-Hirschman Index for this market is ID: 10,4 Test B5 11. The top table shows the market demand schedule for DVDs and the bottom table shows the cost structure of each firm, The market for DVDs is perfectly competitive. There are 100 identical firms, and each firm's total fixed costs are $200 a week Price (dollars per DVD) 8.00 8.50 9.00 9.50 10.00 Quantity demanded (DVDs per week) 30.000 25,500 20,000 15,000 10.000 In long-run equilibrium, what is the number of firms in the market and what is the market price of a DVD? Quantity (DVDs per week) In long-run equilibrium, the number of firms in the market is and the market price of a DVD is 50 100 Marginal Average total cost cost (dollars per DVD) 8.50 12.25 9.00 10.50 9.50 10.08 10.00 10.00 10.50 10.05 150 200 250 OA. 50: $10,00 OB. 150; $8.50 OC. 100; $9.50 OD. 200: $10.00

Answer 1

9> A

In the long run, in a perfect competition, firms make zero economic profit.

10> HHI index is the sum of the square of the shares = 0.35^2+0.2^2+0.25^2+0.15^2+0.05^2=0.25

11> In the long run, firms will produces at the lowest ATC, so 200 output per firm with price 10. the quantity demanded is 10000, total number of firms will be 10000/200=50

A is correct

12> Fixed cost is AFCx quantity = 120*10=1200

So, AFC at 20 units will be 1200/20=60 and AVC will be 150-60=90

As HOMEWORKLIB rule, first 4 questions have been answered.