How does the competitive firm decide on the profit-maximizing level of output? Why is the average cost curve important in this model? Where do average fixed costs show up?
If a competitive firm is earning an economic loss and several other firms in its industry exit the market, then will this firm then earn a normal profit? Explain.
How are competitive firms earning a normal profit affected when costly "homeland security" regulations are imposed on them? If these firms start earning economic losses, then will they have to exit the market? Explain.
Do competitive, price taking firms have supply curves? Explain. Under what conditions do can such firms operate under a loss? What is the shutdown rule?
What happens to economic profits and economic losses in the long run? Why?
Define: increasing , constant, and decreasing cost industries.
Why is perfect competition often used as a benchmark from which to compare other market structures?
Price taking behavior occurs when
A) P = LRAVC.
B) the firm cannot sell all it wants at the market price.
C) the firm faces so much competition that it cannot control its
price.
D) both a and c
E) both b and c
If a firm is making zero economic profit,
A) it will be forced to shut down and leave the market.
B) it will also generally be making zero accounting profit.
C) it is doing as well as typical firms in other markets.
D) it will not survive in the long run.
If the firms in a price-taker market are making short-run profits, what will happen to the market price in the long run? Explain.
“In a price-taker market, if a business operator produces efficiently—that is, if the cost of producing the good is minimized—the operator will be able to make at least a normal profit.” True or false? Explain.
Suppose the government of a large city levies a 5 percent sales tax on hotel rooms. How will the tax affect (a) prices of hotel rooms, (b) the profits of hotel owners, and (c) overall spending on hotel rooms (spending that includes paying the tax)?
If coffee suppliers are price takers, how will an unanticipated increase in demand for their product affect each of the following, in a market that is initially in long-run equilibrium?
a. the short-run market price of the product
b. industry output in the short run
c. profitability in the short run
d. long-run market price in the industry
e. industry output in the long run
f. profitability in the long run
Suppose that the development of a new drought-resistant hybrid seed corn leads to a 50 percent increase in the average yield per acre without increasing cost to the farmers who use the new technology. If the producers in the corn production industry were price takers, what would happen to the following?
a. the price of corn
b. the profitability of corn farmers who quickly adopt the new technology
c. the profitability of corn farmers who are slow to adopt the new technology
d. the price of soybeans, a substitute product for corn
“When the firms in the industry are just able to cover their cost of production, economic profit is zero. Therefore, if demand falls, causing prices to go down even a little bit, all of the firms in the industry will be driven out of business.” True or false? Explain.
If a competitive firm is earning an economic loss and several other firms in its industry exit the market, then will this firm then earn a normal profit? Explain.
How are competitive firms earning a normal profit affected when costly "homeland security" regulations are imposed on them? If these firms start earning economic losses, then will they have to exit the market? Explain.
Do competitive, price taking firms have supply curves? Explain. Under what conditions do can such firms operate under a loss? What is the shutdown rule?
What happens to economic profits and economic losses in the long run? Why?
Define: increasing , constant, and decreasing cost industries.
Why is perfect competition often used as a benchmark from which to compare other market structures?
Price taking behavior occurs when
A) P = LRAVC.
B) the firm cannot sell all it wants at the market price.
C) the firm faces so much competition that it cannot control its
price.
D) both a and c
E) both b and c
If a firm is making zero economic profit,
A) it will be forced to shut down and leave the market.
B) it will also generally be making zero accounting profit.
C) it is doing as well as typical firms in other markets.
D) it will not survive in the long run.
If the firms in a price-taker market are making short-run profits, what will happen to the market price in the long run? Explain.
“In a price-taker market, if a business operator produces efficiently—that is, if the cost of producing the good is minimized—the operator will be able to make at least a normal profit.” True or false? Explain.
Suppose the government of a large city levies a 5 percent sales tax on hotel rooms. How will the tax affect (a) prices of hotel rooms, (b) the profits of hotel owners, and (c) overall spending on hotel rooms (spending that includes paying the tax)?
If coffee suppliers are price takers, how will an unanticipated increase in demand for their product affect each of the following, in a market that is initially in long-run equilibrium?
a. the short-run market price of the product
b. industry output in the short run
c. profitability in the short run
d. long-run market price in the industry
e. industry output in the long run
f. profitability in the long run
Suppose that the development of a new drought-resistant hybrid seed corn leads to a 50 percent increase in the average yield per acre without increasing cost to the farmers who use the new technology. If the producers in the corn production industry were price takers, what would happen to the following?
a. the price of corn
b. the profitability of corn farmers who quickly adopt the new technology
c. the profitability of corn farmers who are slow to adopt the new technology
d. the price of soybeans, a substitute product for corn
“When the firms in the industry are just able to cover their cost of production, economic profit is zero. Therefore, if demand falls, causing prices to go down even a little bit, all of the firms in the industry will be driven out of business.” True or false? Explain.
<< Home