Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 9.A, Problem 5P
To determine
The demand and supply in the long run.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
In a fishery the long-run harvest function (harvest volume) isH(E) = aE - bE2, with a, b representing positive constants and E is fishing effort.Total cost is TC(E) = CE, with e being the unit cost of effort.Total revenue is TR(E) = pH(E), with p being the constant price of fish.a) Find the open-access equilibrium values of effort and harvest.
b) Find the fishing effort that maximizes resource rent, EvEy, and the corresponding harvest,HMEY. c) Find the fishing effort that maximizes sustainable yield (harvest), EMsy.
Answer only sub parts b and c.
The figure shows the market demand curve for penicillin, an antibiotic medicine. Initially, the
market was supplied by perfectly competitive firms Later, the government granted the exclusive
right to produce and sell penicillin to one firm. The figure also shows the marginal revenue curve
(MR) of the firm once it begins to operate as a monopoly. The marginal cost is constant at $3,
irrespective of the market structure
What is the surplus enjoyed by the firm when it is the sole supplier of the medicine?
OA. 590
OB. $180
OC. $30
OD. $60
Price/Cost (5)
10
1
10
20 30 40
MR
Demand
50 60 70
80 90 Quantity
(units)
The first graph depicts the industry supply and demand for yoga classes. Assume that the market is initially in equilibrium
at the intersection of lines D and S.
The second graph is the cost information for a single firm in this perfectly competitive industry.
Assume there is an increase in the industry demand for yoga classes and the industry demand curve moves from D to D1.
Furthermore, assume this is a constant cost industry.
Shift the supply (S) curve to the correct positions to reflect long-run equilibrium in this constant cost industry. Next, use the
interactive line to trace out the long-run industry supply curve (LRIS) for this industry.
Price per class
Yoga Industry Supply and Demand
Short-run marginal cost
Long-run
average cost
Short-run
average cost
S
Price=Marginal revenue
DRIS
D1
Quantity of classes
Quantity of classes
Price ($)
Chapter 9 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Table 3 given in the following page describes the long run cost schedules for a typical firm in a given industry operating under perfect competition and without positive or negative external economies. Table 4 gives the demand schedule for the product of this industry. a) Fill out the missing entries in the table b) Plot the long run average total cost and marginal cost curves for the typical firm. Plot the supply curve for the typical firm on a second diagram. Plot the demand schedule for the whole industry on a third diagram. c) Currently the number of firms in the industry is 16. They all enjoy the same cost schedules given in Table 3. What is the equilibrium price? (Hint construct the market supply curve and plot it on the same diagram as the demand curve) d) What will happen to the number of firms in the long run? What are the basic economic forces and the characteristics of competitive markets that justify your answer? e) What is the long run equilibrium price and long run…arrow_forwardSuppose a typical (representative) corn farm has a short run production technology which results in the outcome of U-shaped Average Variable Cost (AVC), Average Total Cost (ATC), and Marginal Cost (MC). Further, suppose this firm sells its product in a market where the price of the good is determined by the interaction of market Demand and Supply. Because an individual firm is very small compared to the rest of the market, we treat the market price as the price given to the firm, and the individual firm cannot impact that price. assume we are in the Short Run for this firm. In graphing, put $ on the vertical axis and lower-case q (firm output) on the horizontal axis. Start with the AFC0, AVC0, ATC0, and MC0 curves . show shifts in any of the cost curves, reflecting the higher cost of land (keeping in mind that this higher cost is independent of how much or how little corn is actually produced) and labeling the changed cost curves with a subscript 1. On the graph with $ on the…arrow_forwardAssume that prior to the outbreak of the coronavirus (Covid-19), the natural gas industry was in Long Run Equilibrium (LRE). Using our side-by-side graph, depict the market equilibrium P0 and Q0, the optimal output of an individual firm representative of the other firms in the industry at this LRE (labeled as q0), and the individual firm’s profit if any. Provide a brief narrative explaining the setting and the profitability of an individual firm in an LRE (including why there is a certain level of profit in this setting). assume the natural gas industry is perfectly competitive, demand is downward sloping, supply is upward sloping, and production technology results in traditional U-shaped ATC and AVC curves. market price is always greater than the minimum of the AVC curve.arrow_forward
- Supply Function. A review of industry-wide data for the jelly and jam manufacturing industry suggests the following industry supply function Q = - 59,000,000 + 500,000P - 125,000PL - 500,000PK + 2,000,000W where Q is cases supplied per year, P is the wholesale price per case ($), PL is the average price paid for unskilled labor ($), PK is the average price of capital (in per cent), and W is weather measured by the average seasonal rainfall in growing areas (in inches). A. Determine the industry supply curve for a recent year when PL = $8, PK = 10 per cent, and W = 20 inches of rainfall. Further, show the industry supply curve with quantity expressed as a function of price, and price expressed as a function of quantity. B. Calculate the quantity supplied by the industry at prices of $50, $60, and $70 per case. C. Calculate the prices necessary to generate a supply of 4 million, 6 million, and 8 million cases.arrow_forwardRound off your final answer to whole #. A company produces and sells a consumer product and is able to control the demand by varying the selling price. The approximate relationship between price and demand is p=45 + 2700/D - 5000/D2 for D > 1 The company is seeking to maximize its profit. The fixed cost is $1,000 and the variable cost is $38 per unit. What is the number of units that should be produced and sold each month to maximize profit?arrow_forwardSuppose all firms in a given industry have the same supply curve given by S;(p) = p/2. а. Plot and label the four industry supply curves generated by these firms if there are 1, 2, 3, or 4 firms operating in the industry. b. If all of the firms had a cost structure such that if the price was below $3, they would be losing money, what would be the equilibrium price and output in the industry if the market demand was equal to D(p) = 3. 5? How many firms would exist in such a market? c. What if the identical conditions as above held except that the market demand was equal to D(p) 8 – p? What would be the equilibrium price and output? How %3D many firms would operate in such a market?arrow_forward
- Despondent over the Red Sox's terrible season, Prof. Gruber decides to quit his day job and start a bicycle manufacturing firm in Kendall Square. As he starts looking into the bicycle manufacturing industry, he realizes it has some interesting features. First, he realizes that it operates as a competitive industry. Second, he finds that there are two technologies used by firms in the industry. Technology 1 uses solar power, and has a cost function C1(q)=q+4Q2+32 for q>0. Technology 2 uses electricity from the grid and is more efficient, with a cost function C2(q)=q+2Q2+32 for q>0. Assume that we are in the long run, so firms using both technologies can shut and leave the market at 0 cost, so that C(0)=0 for both technologies. Now, suppose that the government of Massachusetts offers solar subsidies to 10 bicycle manufacturers. These subsidies are for $80 and the manufacturers receive these subsidies as long as they construct a bicycle manufacturing plant using the newly-invented…arrow_forwardSuppose that the long-run total cost function for a typical producer is given by LRTC = 200q - 3q + 0.02q where q is the output of the typical firm. Suppose that the market demand is given by Q = 10000 20P, where Q is the total quantity demanded and P is the market price. Assuming that the industry exhibits constant costs and that all firms are identical, what is the long-run equilibrium output (q) of a typical producer. long-run equilibrium price (P) and number of firms operating (n) at the long-run equilibrium, respectively? O qR 100 plR – 40 n-92 %3D = 100, pLR = 75, n-85 %3D O qLR = 50, PLR = 75. n=85 %3D qLR =50, PLR = 40, n=92 = 40, n-92arrow_forwardThe market for calculators is a perfectly competitive industry facing typical U-shaped ATC, AVC, and MC cost curves. Demand is linear and has a downward slope. The industry is filled with many homogeneous firms. Using a side-by-side graph that depicts both the market (on the left) and a representative firm (on the right), graphically depict what will happen to (a) P (price), (b) Q (market output), (c) q (representative firm's output), and (d) π (representative firm's profit) when the market moves from the original short run equilibrium (SRE) with positive profits to a new long run equilibrium (LRE).arrow_forward
- 1. Consider two industries. Industry A has n = 3 identical firms, and each firm has cost function C(q) = , where q; is the quantity produced by firm i. The market demand is P(Q) = , where Q = E i. Industry B has n = 5 firms, the same market demand function, and cost of firm i in industry B is C(q.) = ciqi, such that ci = , c2 = }, and c3 = C4 = C5 = 1o. (a) Find the Cournot equilibrium quantities q1,..., 43 in industry A. Explain how Cournot equilibrium is defined and how you computed the equilibrium. (b) Find the Cournot equilibrium quantities q1,..., 45 in industry B. Explain how you computed the equilibrium. (c) Is either industry: (1) monopoly, (2) monopolistic competition, (3) perfectly competitive, (4) dominant firm and competitive fringe, (5) none of these? (d) Compute the Herfindahl-Hirschman Indexes HA and HB for Industries A and B, respectively. What can you conclude from these indexes? (e) Compute the Number's Equivalents NA and NB for Industries A and B, respectively. What…arrow_forwardSuppose that demand for a particular style of handmade Rwandan baskets is Qd = 1700 – 10P. Each basket maker has the following cost function: TCi = 1000 + 50 qi + .1 qi^2. Given this information, find the market outcomes under the various market structures below Perfect competition, long-run. Given the same cost functions above, find the long-run equilibrium quantity per firm, the LR market price, market quantity and equilibrium number of firms. What is the profit or loss per firm? What is MCi and ATCi?arrow_forwardI) Consider the market for a particular type of financial service. Assume 1) all firms are identicaland 2) it is a perfectly competitive market. Further, assume the industry is a constant costindustry. Each firm’s total cost function is TC = 2q^3 – 30q^2 + 150q. (i) What is the long run equilibrium price and quantity for each firm?(ii) The industry demand function is Qd=10000-10p. How many firms are there in the industry in thelong run?(iii) The demand has changed to Qd=6000-4p. How many firms are there in the industry now in the longrun?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education