Brand X is one of many firms in a competitive industry where each firm has a...

Brand X is one of many firms in a competitive industry where each firm has a constant marginal cost of 2 dollars per unit of output. If marginal cost for Brand X rises to 4 dollars per unit and marginal costs of all other firms in the industry stay constant, by how much does the price in the industry increase?

a. 2 dollars

b. 1 dollar

c. 0 dollar

d. 2/n, where n is the number of firms in the industry

e. None of the above.

Solutions

Expert Solution

Answer

c. 0 dollar

the single firm in a competitive market can not influence the market price as the market price is calculated by market demand and supply equilibrium. The firm will exit the industry in the long run because at this cost the firm cannot operate in the industry.

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

Suppose there are 100 firms in a perfectly competitive industry. Each firm has a U- shaped,...

Suppose there are 100 firms in a perfectly competitive industry. Each firm has a U- shaped, long-run average cost curve that reaches a minimum of $10 at an output level of 8 units. Marginal costs are given by MC(q) = q + 2 and market demand is given by Q= 1000 - 20P a. Find the long-run equilibrium in this market and determine the consumer and producer surplus (in this case, the areas of the triangles). b. Suppose instead there...

The market for laundry detergent is monopolistically competitive. Each firm owns one brand, and each brand...

The market for laundry detergent is monopolistically competitive. Each firm owns one brand, and each brand has effectively differentiated itself so that it has some market power (i.e., faces a downward sloping demand curve). Still, no brand earns economic profits, because entry causes the demand for each brand to shift in until the seller can just break even. All firms have identical cost functions, which are U-shaped. (a) Is this market in long-term or short-term equilibrium? Explain your claim? Now...

A competitive industry includes a large number of identical firms. Each firm has the total cost...

A competitive industry includes a large number of identical firms. Each firm has the total cost function TC(q) = q2 + 25. It can be shown that each firm’s marginal cost function is MC(q) = 2q. a. Derive an equation for a single firm’s supply equation.. b. Derive the individual firm’s average total cost equation. Show your work. Now suppose the market price of the firms’ output is $8. c. What will each firm’s profit-maximizing output be equal to? d....

Consider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical

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.

Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical

Consider the competitive market for copper. 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.

Suppose the cell phone industry is purely competitive and consists of 1,000 identical firms. Each firm...

Suppose the cell phone industry is purely competitive and consists of 1,000 identical firms. Each firm is maximizing total profit by producing 100 phones and selling them at a price of $50 each. The per unit profit is $8 per phone. Assume the firms have normal-shaped curves and minimum ATC is 40 at 75 units. The minimum AVC is 30 at 50 units. a. Draw graphs representing the industry (market) and representative firm. Show on the industry graph market supply...

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient...

compared with firms in a perfectly competitive industry, firms in a monopolistically competitive industry are inefficient because thery a. do not lower the product price if put prices fall b. waste resources by producing an excess amount of output c. restrict their output levels to maximiz profirs d make economic profits in the long run. which of the following statement is true about a firm in a perfectly competitive market a. the demand for its product is a downward sloping...

10. A perfectly competitive industry consists of many identical firms, each with a long-run average total...

10. A perfectly competitive industry consists of many identical firms, each with a long-run average total cost of LATC = 800 – 10Q + 0.1Q2 and long-run marginal cost of LMC = 800 – 20Q + 0.3Q2. a. In long-run equilibrium, how much will each firm produce? b. What is the long-run equilibrium price? c. The industry's demand curve is QD = 40,000 – 70P. How many units do consumers buy in long-run equilibrium? How many firms are in the...

A monopolistically competitive firm sells a differentiated product but there are many firms and there is...

A monopolistically competitive firm sells a differentiated product but there are many firms and there is competition involved..How do such firms still manage to promote their product? Do they make Economic profit in the long run?

. Suppose that each firm in a competitive industry has the following costs: TC = 100...

. Suppose that each firm in a competitive industry has the following costs: TC = 100 + ???? 2 MC = 2???? Where ???? is an individual firm’s quantity produced. The market demand curve for this product is ????=100-P Currently, there are 10 firms in the market. A. At what quantity is ATC curve at its minimum? B. Give the equation for each firm’s supply curve for the short-run and for the long-run. C. Give the equation for the market...

Subjects