In the perfectly competitive market for mobile phone production all firms have access to the same technology. Suppose that the mobile phone industry starts from a long run equilibrium and has decreasing marginal costs. Assume that a demand is affected by a negative shock. O In the short run, the number of firms doesn't change, prices drop and profits decline (become negative) O In the long run, the number of firms decreases (firms exit), prices increase and profits go to zero O In the short run, the number of firms, prices and profits remain same but in the long run all of these decline O Both a) and b)
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- Suppose that bicycles are produced by a perfectly competitive, constant-cost industryWhich of the following will have a larger effect the long-run price of bicycles: a government program to advertise the health benefits of bicyclingor (2) a government program increases the demand for steel, an input in the manufacture of bicycles that is produced in an increasing cost industry ? O. Option 1: shifts the demand curve out and increases the price. O. Option 2: shifts the supply curve up and increases the price O. Option 2: it shifts the demand curve up and increases the quantity. O. Option 2: shifts the supply curve up and increases the quantity.20.Suppose a demand for good produced by a certain industry changes then answer the following questions:1- What will be the affect of change in demand on the output of the firm and industry in short run?2- What will be the affect of change in demand on the output of the firm and industry in long run?3-For what reason the affect of change in demand on firm's and industry's output differ in short and long run?4- Will the condition of zero economic profit be met in long run? how?er 11 i Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice OO O the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. 23 11,229 X OCT all Z A
- Consider a perfectly competitive market that is in long-run equilibrium. Suppose a demand shock decreases demand. In this case: A. Firms will make short-run economic loss, inducing firms to enter B. Firms will make short-run economic profit, inducing firms to exit OC. Firms will make short-run economic profit, inducing firms to enter O D. Firms will make short-run economic loss, inducing firms to exit As a result of the demand shock, the market supply curve will shift and long-run profits will end up being O A. right; higher B. left; the same C. left; lower D. right; the sameWhen a firm makes profit, this sends a signal to others. More competitors would enter the business, increasing supply and driving prices O positive economic profit; up O positive economic profit; down O pormal profit; down O positive accounting profit; down.Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
- Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…A market is in long-run equilibrium and firms in this market have identical cost structures suppose demand in this market decreases. Which of the folowing are coreet descriptors of what happens to tho individual firms and the whole market as the market fist leaves and then returns to long-run equilibrium? Instructions: You may select more than one answer cick the box with a check mark for correct answers and dick to empty the box for the wrong answers. 0 Market proe will decrease in the longrun. O Market quantity will remain the same in the long-run. O Individual firms' profit maximizing output will decrease in the long run. O Firms will exit the market inthe long run. O Individual firms' profit maximizing output wil decrease in the shon-nun. O Market quantity decrease in the long run. o Firms win enter into the market in the long run. O Market price wil decrease in the short-run. References eBook & Resources Leaming objective: 13-08 Calculato the Section Responding…
- True oe False: If the pandemic causes firms in a competitive industry to spend $100,000 per month on safety measures (regardless of the output level), the firms bear this cost in the short-run, but consumers bear it in the long-run.1. Assume you have a perfectly competitive market with two types of firms. The only difference between the two types of firms is that the minimum average cost at which firms of type A can produce is lower than the minimum average cost at which firms of type B can produce. a. Give a graphical example of what the individual long run supply functions of a type A firm and a type B firm may look like. Explain the shape in detail. b. Based on your example, what will the aggregate supply curve of a market with 2 firms, one type A and one type B, look like? Explain the shape in detail. C. Assume now that all potential firms are identical. Evaluate the impact of a demand shock on the long run equilibrium market price and firm numbers. You must use graphical analysis and explain in detail.(? 100 90 80 70 60 50 40 АТС 30 20 AVC 10 MC O 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of pounds) COSTS (Dollars per pound)