Question

In: Economics

The questions are all related to tool and die manufacturers. The market for the products of...

The questions are all related to tool and die manufacturers. The market for the products of tool and die manufacturers is relatively easy to enter and includes a large number of firms that produce a variety of fixtures, dies, molds, machine tools, cutting tools, gauges, and other tools used in other manufacturing processes.

A.

The above information about tool and die manufacturers implies the industry is a:

perfectly competitive industry

monopolistically competitive industry

oligopoly

monopoly

b.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the market price of tool and die products?

increase price

decrease price

no impact on price

c.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the profit maximizing level of output for individual tool and die manufacturers?

increase output

decrease output

no impact on output

d.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect firm profit in the short run?

increase profit

decrease profit

no impact on profit in the short run

e.

How would a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the market in the long run, assuming lower demand persists?

there would be entry

there would be exit

there would be neither entry nor exit

Solutions

Expert Solution

a) perfectly competitive industry

(In a perfectly competitive market all firms produced similar products, market is very easy to enter and there is no transaction cost is associated with it)..

b) decrease the price..

(If there is a decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products then the market price of tool and die products are decreased and will sell at low price in the market)..

c) increase output..

(If decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products then simultaneously the market price of tool and die products are also go down and the profit maximizing level of output for tool and die manufacturers will go up)..

d) decrease profit..

(decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the profit margin and it will eventually go down in short run)..

e) there would be exit..

(decrease in economic activity leading to a decrease in the demand for a wide range of manufactured products affect the market in long run with lower demand persists there will losses and many firms would exit from the market)..

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