Question

Assume that pistachios are produced in a perfectly competitive constant-cost industry. *****I JUST NEED part C AND D ANSWERED NOT A AND B, JUST INCLUDED FOR REFERENCE TO PROBLEM******

a. The market for pistachios is in a full long-run equilibrium state. Use side-by-side diagrams for the market and a typical firm to illustrate the equilibrium, being sure to include price, market output, the output of the typical firm and relevant cost curves..

b. Now assume that there is an increase in the demand for pistachios. How will each of the following be affected in the short run? i. the demand curve facing the typical firm ii. the typical firm’s output iii. the typical firm’s total revenue iv. the typical firm’s average total cost v. the typical firm’s profit

c. What further adjustment will occur in the long run? Why?

d. When long-run equilibrium is restored, how will each of the following compare to the values from part a? i. market price ii. market output iii. the typical firm’s output iv. number of firms in the market.

Answer 1

c.

Change in accordance with Long-run Equilibrium in Perfect Competition

• In the event that most firms are making strange benefits in the short run, this energizes the passage of new firms into the business
• This will cause an outward move in market supply compelling down the cost
• The expansion in supply will, in the end, diminish the cost until value = since quite a while ago runs normal expenses. Now, each firm in the business is making typical benefits.
• Different things continuing as before, there is no further motivating force for the development of firms all through the business and since a long time ago run harmony has been built up. T
• Expansion in the market supply
• The impact of expanded market supply is to bring down the cost and cause an extension along the market request bend.
• Be that as it may, for every provider, the value they "take" is currently lower and it is this that drives down the degree of benefit made towards ordinary benefit balance.
• Rivalry drives down the market value diminishing the benefit of each residual business in the market

As new firms enter, the supply curve shifts to the right, price falls, and profits fall. Firms continue to enter the industry until economic profits fall to zero. If firms in an industry are experiencing economic losses, some will leave. The supply curve shifts to the left, increasing-price and reducing losses. Firms continue to leave until the remaining firms are no longer suffering losses—until economic profits are zero.

The economic concept of profit differs from accounting profit. The accounting concept deals only with explicit costs, while the economic concept of profit incorporates explicit and implicit costs.
The existence of economic profits attracts entry, economic losses lead to an exit, and in long-run equilibrium, firms in a perfectly competitive industry will earn zero economic profit.

d.

When the long-run equilibrium is restored the demand of the pistachios obviously decreases. Thus resulting in the reduction of the market price.

As market price reduces the quantity produced decreases which reduce the market output.

The firm's output is reduced compared to the previous demand increase in the market.

The number of firms can depreciate according to the intensity of the demand decrease.