Homework Answers
No,
In a competitive market, each firm sells only a small fraction of the entire industry sales, how much output the firm decides to sell will have no effect on the market price.
The market price is determined by the industry demand and supply curves. Thus, the competitive firm is a price-taker.The firm’s production will have no effect on the price of the product.
The firm is a price-taker, the demand curve, d; facing an individual firm is given by a horizontal line.
The market demand curve, D, shows how much wheat all consumers will buy at each possible price.
The market demand curve is downward-sloping because consumers buy more wheat at a lower price. The demand curve, d, facing the firm is horizontal because the firm’s sales will have no effect on the price. Price is determined by the interaction of all firms and consumers in the market, not by the output decision of a single firm.
The demand curve, d, facing an individual firm in a competitive market is both its average revenue curve and its marginal revenue curve. Along this demand curve, marginal revenue and price is equal.
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Quesiton 4 (2 points) Consider the market for wheat which is a perfectly competitive market. Is...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Chicago. There are...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Chicago. There are 90 firms in the industry, each of which has the cost curves shown on the following graph: ? 100 90 MC BO 70 60 ATC 50 COST (Cents per bushel) 40 30 20 AVC 10 0 O 5 10 15 20 25 30 35 QUANTITY OF OUTPUT (Thousands of bushels) 40 45 50 The following graph shows the market demand for wheat. Use the...
4) Consider the following perfectly competitive market for board games: (Do NOT round values.) (2...
4) Consider the following perfectly competitive market for board games: (Do NOT round values.) (22 marks) Q-204P Qd-300 - P a) Calculate initial equilibrium supply and demand. b) Calculate consumer and producer surplus. Show graphically c) Realizing that board games are awesome, the government creates a $50 price ceiling. Recalculate new equilibrium quantities. Show graphically d) Calculate consumer surplus, producer surplus, and deadweight loss for the worst case scenario. Show graphically
4) Consider the following perfectly competitive market for board...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Philadelphia. There...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Philadelphia. There are 80 firms in the industry, each of which has the cost curves shown on the following graph: MC ATC COST (Cents per bushel) AVC 0 5 10 15 20 25 30 35 40 45 50 Demand Supply Curve Equilibrium PRICE (Cents per bushel) 0 400 800 1200 1600 2000 2400 2800 3200 3600 4000 QUANTITY OF OUTPUT (Thousands of bushels) in the short run....
3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case...
3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case where the firm is facing PMC SRATC LRATC by using yin the following diagram. In this diagram, you should include demand curve (d), marginal cost curve (MC), short run average total cost curve (SRATC), and long run average total cost curve (LRATC). Remember to label all axes. (2 points) pves vwerase totail cost curve (SRATC,aushould include demandcun b. Does the firm exhibit productive efficiency?...
DEMAND & SUPPLY: Consider the market for bananas which is known to be perfectly competitive. The...
DEMAND & SUPPLY: Consider the market for bananas which is known to be perfectly competitive. The market is characterized by the following relationships: QD = 10,000 – 140P QS = 7500 + 125P Plot the demand curve and the supply curve on a graph. Clearly label the axes and the intercepts. Why is the demand-curve downward-sloping? What is the slope of the demand curve? Why is the supply-curve upward-sloping? What is the slope of the supply curve? What is the...
The perfectly competitive firm and market in the short run Consider a perfectly competitive market where...
The perfectly competitive firm and market in the short run Consider a perfectly competitive market where demand is QD = 2,000 - 40P and quantity is measured in units while price is measured in dollars per unit. The long run supply is QS = 100P - 800. a) Find the equilibrium price and the equilibrium quantity. b) When the market is in equilibrium, what is the total expenditure in this market? c) When the market is in equilibrium, what is...
3. Illustrate graphically Suppose that a competitive firms marginal cost of producing output 2 is given...
3. Illustrate graphically Suppose that a competitive firms marginal cost of producing output 2 is given by MC(q)= 70+6q Assume that the market price of the firm's product is $145. A. At what level of output will the firm produce? B. How much is the firm's producer surplus? C. Illustrate graphically profit maximization point and producer surplus. D. Illustrate this market at a loss. Explain. 4. Graphically illustrate a perfectly competitive firm and a non-perfectly competitive firm side by side....
) Looking at differences between a single firm within a perfectly competitive market and a monopoly,...
) Looking at differences between a single firm within a perfectly competitive market and a monopoly, which of the following is true? a) A single firm within a perfectly competitive market, sees the entire downward sloping demand curve of the perfectly competitive market. b) A single firm within the perfectly competitive market can set its price at any level and will not see a change in the demand. c) Because it is the only producer in the market, the monopoly...
4. Suppose that the demand for a drug is perfectly inelastic and the market is initially...
4. Suppose that the demand for a drug is perfectly inelastic and the market is initially in equilibrium. Suppose further that there is an increase in the price of an input required to produce of the drug. Everything else held constant, graphically (and in words) illustrate the impact of this action in the market for this drug. What will happen to equilibrium price and equilibrium quantity? How would your answer be different if demand was not perfectly inelastic? (7 points)
1. What is a monopoly? Name 2 differences between a monopoly and a perfectly competitive market....
1. What is a monopoly? Name 2 differences between a monopoly and a perfectly competitive market. 2. What is the profit maximizing condition for a price-setting monopoly? 3. Show that MR follows the notion "same intercept, twice the slope" of demand. 4. Is a monopoly the most socially optimal market? How does a monopoly differ from a perfectly competitive market? Explain and show in a graph. What is the difference in welfare? 5. At what point would a monopoly decide...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Chicago. There are 90 firms in the industry, each of which has the cost curves shown on the following graph: ? 100 90 MC BO 70 60 ATC 50 COST (Cents per bushel) 40 30 20 AVC 10 0 O 5 10 15 20 25 30 35 QUANTITY OF OUTPUT (Thousands of bushels) 40 45 50 The following graph shows the market demand for wheat. Use the...
4) Consider the following perfectly competitive market for board games: (Do NOT round values.) (22 marks) Q-204P Qd-300 - P a) Calculate initial equilibrium supply and demand. b) Calculate consumer and producer surplus. Show graphically c) Realizing that board games are awesome, the government creates a $50 price ceiling. Recalculate new equilibrium quantities. Show graphically d) Calculate consumer surplus, producer surplus, and deadweight loss for the worst case scenario. Show graphically
4) Consider the following perfectly competitive market for board...
6. Short-run perfectly competitive equilibrium Consider a perfectly competitive market for wheat in Philadelphia. There are 80 firms in the industry, each of which has the cost curves shown on the following graph: MC ATC COST (Cents per bushel) AVC 0 5 10 15 20 25 30 35 40 45 50 Demand Supply Curve Equilibrium PRICE (Cents per bushel) 0 400 800 1200 1600 2000 2400 2800 3200 3600 4000 QUANTITY OF OUTPUT (Thousands of bushels) in the short run....
3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case where the firm is facing PMC SRATC LRATC by using yin the following diagram. In this diagram, you should include demand curve (d), marginal cost curve (MC), short run average total cost curve (SRATC), and long run average total cost curve (LRATC). Remember to label all axes. (2 points) pves vwerase totail cost curve (SRATC,aushould include demandcun b. Does the firm exhibit productive efficiency?...
3. Illustrate graphically Suppose that a competitive firms marginal cost of producing output 2 is given by MC(q)= 70+6q Assume that the market price of the firm's product is $145. A. At what level of output will the firm produce? B. How much is the firm's producer surplus? C. Illustrate graphically profit maximization point and producer surplus. D. Illustrate this market at a loss. Explain. 4. Graphically illustrate a perfectly competitive firm and a non-perfectly competitive firm side by side....
4. Suppose that the demand for a drug is perfectly inelastic and the market is initially in equilibrium. Suppose further that there is an increase in the price of an input required to produce of the drug. Everything else held constant, graphically (and in words) illustrate the impact of this action in the market for this drug. What will happen to equilibrium price and equilibrium quantity? How would your answer be different if demand was not perfectly inelastic? (7 points)
1. What is a monopoly? Name 2 differences between a monopoly and a perfectly competitive market. 2. What is the profit maximizing condition for a price-setting monopoly? 3. Show that MR follows the notion "same intercept, twice the slope" of demand. 4. Is a monopoly the most socially optimal market? How does a monopoly differ from a perfectly competitive market? Explain and show in a graph. What is the difference in welfare? 5. At what point would a monopoly decide...
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