Homework Answers
Correct Answer:
Profit will be equal to zero
Explanation:
Due to rise in price of corn, firms will make profits. To see this, more firms / farmers will enter in to the market to sell corn and earn profit. This trend will continue till that point when profit will become zero. Then, firms / farmers will stop entering in to the perfectly competitive market. Thus, in long term, profit or economic profit will be equal to zero.
Correct Answer:
Profit will be equal to zero
Explanation:
In long run, firm will make exit from the market due to experiencing losses in perfectly competitive market. This trend will continue to the point when profit will become zero for the firms rather negative. Thus, stability in the market will take place.
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Suppose that the price of corn, a...
Suppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry,...
Suppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry, increased 208% last year as demand for corn based ethanol fuel increased. What do you expect to happen in the long run for the corn industry given this recent success? The price per bushel of corn will continue to increase, yielding higher profits. Thus more firms will enter the market indefinitely. Profits will become negative due to over farming, which will result in the...
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Assume that the perfectly competitive market for ethanol is in long-run equilibrium. Now suppose that the price of gasoline, a substitute for ethanol, increases. Explain what will happen in the market for ethanol. 1) Describe how this change will affect short-run economic profits. 2) What will happen to the number of firms producing ethanol in the long run? 3) How will price and output in this industry adjust in the long run?
assume that the perfectly competitive market for ethanol is in long-run equilibrium. now suppose that the...
assume that the perfectly competitive market for ethanol is in long-run equilibrium. now suppose that the price of gasoline, a substitute for ethanol, increase. explain what will happen in the market for ethanol.(1) describe how this change will affect short-run economic profits.(2) what will happen to the number of firms producing ethanol in the long-run? (3)how will price and output in this industry adjust in the long run?
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6. Suppose that the trucking market is a perfectly competitive industry in long run equi librium....
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3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case...
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Question 2: Suppose a market is having positive economic profit in the short run, what do you think will most like...
Question 2: Suppose a market is having positive economic profit in the short run, what do you think will most likely happen in the long run? 2.1 2.2 run? Explain in detail. Based on the lecture in the class, why would a firm choose to operate at a loss in the short When do firms decide to shut down production in the short run? Explain. 2.3. Question 3: For each of the following, is the business a price-taking producer? Explain...
Suppose firms in a monopolistically competitive industry currently charge a price less than their average total...
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Suppose that the price of corn, a crop produced in a perfectly (or purely) competitive industry, increased 208% last year as demand for corn based ethanol fuel increased. What do you expect to happen in the long run for the corn industry given this recent success? The price per bushel of corn will continue to increase, yielding higher profits. Thus more firms will enter the market indefinitely. Profits will become negative due to over farming, which will result in the...
6. Suppose that the trucking market is a perfectly competitive industry in long run equi librium. Each of the identical trucking firms has the same (long run) cost function: TC = 2250 + 10q2, where q is the volume of sales by each establishment. Each of the identical firms therefore have the same marginal cost: MC = 20q (a) What is the average cost function for the identical trucking firms? (b) How much does each individual firm produce in the...
3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case where the firm is facing PMC SRATC LRATC by using yin the following diagram. In this diagram, you should include demand curve (d), marginal cost curve (MC), short run average total cost curve (SRATC), and long run average total cost curve (LRATC). Remember to label all axes. (2 points) pves vwerase totail cost curve (SRATC,aushould include demandcun b. Does the firm exhibit productive efficiency?...
Question 2: Suppose a market is having positive economic profit in the short run, what do you think will most likely happen in the long run? 2.1 2.2 run? Explain in detail. Based on the lecture in the class, why would a firm choose to operate at a loss in the short When do firms decide to shut down production in the short run? Explain. 2.3. Question 3: For each of the following, is the business a price-taking producer? Explain...
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