Question
In: Economics
2. All steak houses have the same cost curves. Long-run average cost curve: AC = -250...
2. All steak houses have the same cost curves. Long-run average cost curve: AC = -250 + 4q + 4,900/q Long-run total cost curve: TC= 4,900 – 250q + 4q2 Long-run marginal cost curve: MC = -250 + 8q Market demand for steaks: QD = 24,375 – 200P q = number of steaks sold by firm per hour P = price per steak
2a. Calculate the long-run equilibrium price and how many steaks each individual owner will sell per hour.
2b. Calculate how many firms there are?
2c. If fixed costs increase by 640, calculate how many steaks each firm will now produce per hour.
2d. Explain if the industry has increasing, decreasing or constant costs. Calculate the new LR equilibrium price.
Solutions
Expert Solution
* The industry has increasing costs. An industry is called increasing cost industry when price of inputs increases with market expansion. It arises due to external diseconomies of scale where average cost of firm increases as size of industry expands. Since AC increases , so industry can supply more of output only at a higher price. As a result long run industry supply curve is positively sloped.
Rahul Sunny answered 10 months agoRelated Solutions
Draw a long run average cost curve, as well as several short run average cost curves...
Draw a long run average cost curve, as well as several short run
average cost curves if the firm has increasing economies of scale
followed by decreasing economies of scale.
In the long run, all costs are variable. Diagram and explain the long-run average cost curve...
In the long run, all costs are variable. Diagram and explain the
long-run average cost curve and what it means to have (i) economies
of scale, (ii) diseconomies of scale, and (iii) constants costs.
What factors contribute to these economies and diseconomies?
1 The short-run average total cost curve and the long-run average total cost curve are similarly...
1
The short-run average total cost curve and the long-run average
total cost curve are similarly shaped. What are the causes for the
short run and long-run average total cost curve to slope down and
up?
2 Mr. Salim has been working at a car manufacturing plant
forthe last 4 years. He recently lost his job due to the downsizing
of the company he works for due topoor car sales and poor economic
performance. What type of unemployment is Salim...
Q. 2 Suppose that long- run average cost AC = 200 - 4Q + 0.05Q^2. What...
Q. 2 Suppose that long- run average cost AC = 200 - 4Q +
0.05Q^2. What is the quantity at which AC is at a minimum? What is
the value of AC and MC at this rate of production? What is the
long- run equilibrium price?
Q. 3: The Burr Corporation's total cost function (where TC is
the total cost in dollars and Q is quantity) is TC= 200 + 4Q+ 2Q^2
a. If the fi rm is perfectly competitive...
(b) If you drew a firms short run and long run cost curves in the same...
(b) If you drew a firms short run and long run cost curves in
the same graph, the short run cost curve would always be above the
long run cost curve, except at one level of output. Why? What is
special about this level of output?
(c) On a carefully labeled diagram, illustrate the cost
minimizing bundle A for a firm with cobb-douglas technology. Now
consider an increase in the quantity target to some point B. Draw
the new bundle...
Describe how the long run average cost curve is an envelope of short run average cost...
Describe how the long run average cost curve is an envelope of
short run average cost curves.
Question 2 : A) The long-run average total cost curve shows: Select one: a. the plant...
Question 2 :
A)
The long-run average total cost curve shows:
Select one:
a. the plant size or scale that the firm should build.
b. the average total cost of producing where diminishing returns
are not present.
c. the lowest average total cost of producing every level of
output in the long run.
d. where the most profitable level of output occurs.
B)
The minimum efficient scale is the:
Select one:
a. smallest output level where fixed costs are minimised....
How can the long-run average cost (LRAC) curve be derived from the short-run average total cost...
How can the long-run average cost (LRAC) curve be derived from
the short-run average total cost (SRATC) curve?
How can the long-run average cost (LRAC) curve be derived from the short-run average total cost...
How can the long-run average cost (LRAC) curve be derived from
the short-run average total cost (SRATC) curve?
Describe economies of scale and diseconomies of scale.
What are the determinants of economies of scale and
diseconomies of scale, respectively?
Using a real-world company (other than Sysco), explain the
causes of economies of scale for your company.
How would economies of scale help your company compete in its
industry?
Why is the long-run average total cost (LRATC) curve called the planning curve? Illustrate.
Why is the long-run average total cost (LRATC) curve called the
planning curve? Illustrate.
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