3. Suppose a representative firm in a perfectly competitive industry has the following total cost of production in the short run: TC=Q^3-40Q^2+600Q. a. What will be the long run equilibrium quantity for the firm? What will be the long run equilibrium price in this industry? b. Let the industry demand be given by QD=12400-4P. How many firms will be active in the long-run equilibrium? c. Suppose the firm faces a positive demand shock that increases the industry demand to QD=16000-4P. Describe how the industry would respond and calculate the change in the number of firms.

3. Suppose a representative firm in a perfectly competitive industry has the following total cost of production in the short run: TC=Q^3-40Q^2+600Q. a. What will be the long run equilibrium quantity for the firm? What will be the long run equilibrium price in this industry? b. Let the industry demand be given by QD=12400-4P. How many firms will be active in the long-run equilibrium? c. Suppose the firm faces a positive demand shock that increases the industry demand to QD=16000-4P. Describe how the industry would respond and calculate the change in the number of firms.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.7P

See similar textbooks

Similar questions

(a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).
The following problem traces the relationship between firm decisions, market supply, and market equilibrium in a perfectly competitive market. a. Complete the following table for a single firm in the short run. Using the information in the table, fill in the following supply schedule for this individual firm under perfect competition and indicate profit (positive or negative) at each output level. (Hint: At each hypothetical price, what is the MR of producing 1 more unit of output? Combine this with the MC of another unit to figure out the quantity supplied.)
13. Suppose a representative firm in a perfectly competitive industry has the following total cost of production in the short run: TC=Q3-60Q2+1200Q. What will be the long run equilibrium quantity for the firm? What will be the long run equilibrium price in this industry? Let the industry demand be given by QD=10800-4P. How many firms will be active in the long-run equilibrium? Suppose the firm faces a positive demand shock that increases the industry demand to QD=13500-4P. What will be the new equilibrium number of firms in the market assuming that the industry is a constant cost industry?
Assume that the gold-mining industry is perfectly competitive. a) Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine. b) Suppose that an increase in jewelry demand induces a surge in the demand for gold. Using your diagrams, show what happens in the short run to the gold market and to each existing gold mine. c) If the demand for gold remains high, what would happen to the price over time? Specifically, would the new long-run equilibrium price be above, below, or equal to the short-run equilibrium price in part b)? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
3. Technology for producing q gives rise to the cost function c(q) = aq+ bq². The market demand for q is p = a - Bq. (a) If a > 0, if b 0 and b 0 and b >0, what is the long run equilibrium market price and number of firms? Explain.
Suppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 25 million pounds per year. Suppose a top medical journal publishes research that animal-alternative protein sources such as seitan could decrease your expected lifespan by 5 years. The publication is expected to cause consumers to demand seitan at every price. In the short run, firms will respond by ▼ Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the publication. PRICE (Dollars per pound) 10 9 8 7 6 5 2 1 0 10 In the long run, some firms will respond by 9 0 8 5 7 Supply Demand 10 15 20 25 30 35 QUANTITY (Millions of pounds) 40 45 50 Demand Shift the demand curve, the supply curve, or both on the following graph to illustrate both the short-run effects of the blication and the new long- run equilibrium after firms and consumers finish adjusting to the news. Supply 1 Supply O Demand…
Suppose that the seitan industry is initially operating in long-run equilibrium at a price level of $5 per pound of seitan and quantity of 200 million pounds per year. Suppose a top medical journal publishes research that animal-alternative protein sources such as seitan could decrease your expected lifespan by 4 years. The publication expected to cause consumers to demand seitan at every price. In the short run, firms will respond by Shift the demand curve, the supply curve, or both on the following graph to illustrate these short-run effects of the publication. PRICE (Dollars per pound) 10 9 8 2 1 0 0 40 Supply Demand 80 120 160 200 240 280 320 360 QUANTITY (Millions of pounds) 400 Demand Supply (?)
b). The Philadelphia water ice industry is a constant cost industry. The demand for water ice shifts outward each year when it gets hot. What are the steps by which the competitive water ice market insures an increased amount of water ice. Explain and graph at the industry and firm levels. What is the long-run price of water ice?
A perfectly competitive industry consists of many identical firms, each with a long-run total cost function of TC = 500Q-20Q^2+0.5Q^3. a. In long-run equilibrium, how much will each firm produce? b. What is the long-run equilibrium price? c. The industry's demand curve is ?? = 48,000 − 60?. How many firms are in the I ndustry? d. If the industry demand decreases to ?? = 30,000 − 80? how will the industry respond?
12.3 A perfectly competitive market has 1,000 firms. In the very short run, each of the firms has a fixed supply of 100 units. The market demand is given by Q = 160,000 10,000P. a. Calculate the equilibrium price in the very short run. b. Calculate the demand schedule facing any one firm in this industry. c. Calculate what the equilibrium price would be if one of the sellers decided to sell nothing or if one seller decided to sell 200 units. d. At the original equilibrium point, calculate the elasticity of the industry demand curve and the elasticity of the demand curve facing any one seller. Suppose now that, in the short run, each firm has a supply curve that shows the quantity the firm will supply (q) as a function of market price. The specific form of this supply curve is given by 9-200+50P. Using this short-run supply response, supply revised answers to (a)-(d). 11
A firm produces a product in a perfectly competitive industry and has a total cost function TC= 50+4q+2q². a. At the short-run market price of $20, the firm is producing 5 units of output. Is the firm maximizing its profit? Explain. b. What quantity of output will the firm produce in the long run, assuming there is no change in cost structure? What will be the long-run equilibrium price? c. Graphically depict the long-run equilibrium for an individual firm within this market.
Canadian red wheat is a normal good, in a perfectly competitive market that is in long-run equilibrium. There occurs a boom in the economy—incomes rise. What effect does this have on short-run equilibrium? Explain concisely the step-by-step process by which the industry returns to long-run equilibrium. Your answer should include the effects on the individual firm's output and profit, as well as any industry-wide adjustments that take place. Show graphically the relationship between the firm and the industry.