Consider a market structure of perfect competition where firms have a U-shaped average cost curve. Describe the transition from short-run equilibrium to long-run equilibrium, noting the assumptions that are made in this mode
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Consider a market structure of
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- Suppose we have n firms in a perfectly competitive industry. The shapes of the marginal and average cost curves are as usual, i.e., they are U-shaped. The industry demand curve is downward sloping. Please answer the following questions associated with this simple model. Write down the basic assumptions of a perfectly competitive industry. We have frequently stated that these assumptions were very crucial in obtaining certain results from this model. Explain each assumption in that sense in a few sentences. Describe the industry equilibrium and corresponding long-run equilibrium of any firm in this market. For this analysis, you are supposed to draw two graphs, one for the market and one for the representative firm. If there is an increase in the demand for the product in this industry, how is the market going to be affected? What will be the effect of this change on a representative firm in the short-run? Explain possible profit opportunities in the market. As you did in part…Which one of the following is NOT a requirement for or characteristic of perfect competition? The good must be homogeneous (standardised). All market participants should have perfect knowledge of market conditions. Every firm must have the power to set its own price. There must be a large number of sellers. There should be no government intervention. A small farmer is more likely to operate in a perfectly competitive market than a company like SABMiller because: A small business is more likely to keep close control on costs than a large firm. SABMiller employs many people, whereas perfectly competitive firms are owner managed. The demand for beer is less elastic than the demand for food. A small farmer supplies a small share of market supply. Farming is more risky than beer production.Which of the following is not a necessary condition for long-run equilibrium under perfect competition? A)no firm has an incentive to enter the market b)no firm has an incentive to exit the market c)prices are relatively low d)each firm earns zero economic profit
- Short-run supply and long-run equilibrium Consider the competitive market for titanium. 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. 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.In part II, we zoom in on the individual firm in the Australian wheat market, to consider production, costs, and profits. Specifically: a) Start with a model of the situation before the crisis in Ukraine. Draw a model of a representative individual firm in the market for wheat, i.e. an Australian wheat farmer who is a price-taker in the global market for wheat, in long-run equilibrium. Comment on the assumed market structure. Show and explain the amount of wheat the farmer will produce to the market, and explain revenue, costs and profits. b) Now consider the short-run effects of the conflict in Ukraine from the perspective of the Australian wheat farmer. We will do this in two sequences, in the interests of clarity. i. First, consider the increase in the world price. Show how this affects quantity produced, costs, revenue and profit for the farmer. ii. Second, consider the increase in the price of fertiliser. Show how this now affects the quantity produced, costs, revenue and profit…In a perfectly competitive market, which of the following characteristics gives rise to the difference between the short-run equilibrium and the long-run equilibrium? There is perfect information regarding prices and quantities. There is a homogenous product. There are many buyers and many firms acting in the market. There is free entry into and out of the industry.
- Describe how firms in Perfect Competition achieve both allocative and productive efficiency and their significance in relation to the other market models. Why is the portion of the marginal cost curve above the minimum average variable cost the short run supply curve in Perfect Competition?Assume that the MBA education industry is constant-cost and is in long-run equilibrium. Discuss what long-run equilibrium means. Market demand increases, but due to strict accreditation standards, new firms are not permitted to enter the market. Explain the nature of the original long-run equilibrium then analyze the determination of a new long-run equilibrium, showing the effects with the aid of graphs for a representative school as well as for the market as a whole. Explain with a compare/contrast analysis how your analysis changes if MBA’s are produced in an increasing cost industry. Page limit, one page and one page for supporting graphs.Under conditions of perfect or pure competition, or close to those conditions, producers (firms) are what are called “price takers”. This means that the price for the product that they are selling is determined by the market. No matter how little or how much product they supply, they can sell all they want at that price. If they were to price their product higher, they will sell zero. Which of the following is true? The price is equal to marginal revenue but not average revenue The price is equal to marginal revenue and average revenue The price is equal to average revenue but is not equal to marginal revenue The price is above both marginal revenue and average revenue
- The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently making economic losses. Which of the following statements is true about the price of fertilizer? Check all that apply. The price of fertilizer must be less than average total cost. The price of fertilizer must be equal to average variable cost. The price of fertilizer must be less than marginal cost. The following graphs show the cost curves faced by a typical firm, the demand for fertilizer, and possible price and supply curves. Price and Costs a. a MC Firm ATC LAVO II Quantity Ⓒ Price 0 a Demand Market Quantity ?Consider a perfectly competitive market where all firms produce using the same technology. In the long run the equilibrium price equals (Need help? Read chapter 4.6 of the textbook, here: https://playconomics.com/textbooks/view/playconomics4-2019t3/part2/ch4/s6) the Fixed Cost. the minimum Marginal Cost. the minimum Average Total Cost. the maximum Average Variable Cost. None of these.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.
