A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in...

A competitive market begins in a situation of long-run equilibrium. Then, there is a decrease in demand. Describe the process that eventually leads to a new short-run and long-run equilibrium. Show your graph and Explain. Draw a shape to show the firm's short-run economic profit (or loss).

Expert Solution

Rahul Sunny answered 2 years ago

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand falls. By the...

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand falls. By the time all adjustments have been made, price will be __________ its original level if the industry is a(n) __________ costs industry. a. above; decreasing b. at; constant c. at; increasing d. below; increasing e. a and d

Draw a graph showing a market and a perfectly competitive firm in long run equilibrium.

1.In long-run competitive market equilibrium, price equals _ and economic profit is .

1.In long-run competitive market equilibrium, price equals _______ and economic profit is ______.A. Minimum average variable cost; greater than zeroB. Minimum average total cost; zeroC. Maximum marginal cost; zeroD.Minimum fixed cost; greater than zero2. Which of the following market structures has the highest barriers to entry? A. Perfect competition B. Monopoly C. Monopolistic competition D. Oligopoly3. Which of the following is consistent with a competitive market? A. A small number of firms B. Exit of small firms when profits are high for large firms C. Zero economic...

Suppose that the restaurant market is a perfectly competitive industry in long run equilibrium. Each of...

Suppose that the restaurant market is a perfectly competitive industry in long run equilibrium. Each of the identical restaurants has the same (long run) cost function: T C = 225 + q 2 , where q is the volume of sales by each establishment. Each of the identical firms therefore have the same marginal cost: MC = 2q. (a) What is the average cost function for the identical restaurants? (b) How much does each individual firm produce in the long...

1. a. Graph a competitive firm and market in long-run equilibrium; Explain why it is a...

1. a. Graph a competitive firm and market in long-run equilibrium; Explain why it is a long run equilibrium. b. Graph and explain what happens in the short run with a supported price floor. c. Assume this is an increasing cost industry. Graph and explain each step through the LR. d. Show the same but for a price ceiling. 2. Show that whether the producers or consumers directly pay the per-unit tax does not matter. Explain what does determine who...

Suppose the market for toilet paper is perfectly competitive. The long run equilibrium is characterized by...

Suppose the market for toilet paper is perfectly competitive. The long run equilibrium is characterized by the price being $2 per roll with 20 firms making toilet paper, each selling 5 million rolls per week for a total of 100 million rolls being sold each week. A pandemic then breaks out, where people are afraid that the world will run out of toilet paper. a) what happens in the short run to: -1) The price of a roll of toilet...

Suppose the market for fresh pork is a competitive market. Initially, it is operating at its long-run competitive equilibrium at a market price of $50.

Suppose the market for fresh pork is a competitive market. Initially, it is operating at its long-run competitive equilibrium at a market price of $50.Owing to the spread of COVID-19, many people turn to buying frozen meat once a week rather than fresh pork every day. As a result, the market price of fresh pork reduces to $30.a. With the aid of a pair of market-and-firm diagrams, illustrate how this would affect the equilibrium price and quantity in the fresh...

Suppose the market for fresh pork is a competitive market. Initially, it is operating at its long-run competitive equilibrium at a market price of $50

Suppose the market for fresh pork is a competitive market. Initially, it is operating at its long-run competitive equilibrium at a market price of $50. Owing to the spread of COVID-19, many people turn to buying frozen meat once a week rather than fresh pork every day. As a result, the market price of fresh pork reduces to $30. a. With the aid of a pair of market-and-firm diagrams, illustrate how this would affect the equilibrium price and quantity in...

7. Short-run supply and long-run equilibrium Consider the competitive market for copper. Assume that, regardless of...

7. Short-run supply and long-run equilibrium 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. The following diagram shows the market demand for copper. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in...

2. Assume the market for soybeans is perfectly competitive and in long-run equilibrium, and Norma’s Soybeans...

2. Assume the market for soybeans is perfectly competitive and in long-run equilibrium, and Norma’s Soybeans is a small farm in the market. Draw correctly labeled side-by-side graphs of both the market for soybeans and the firm, labeling the market equilibrium Pm and Qm and Norma’s Soybean equilibrium Pf and qf. Is Norma’s Soybeans earning economic profits, economic losses, or a normal profit? Now assume that in the soybean market there is a huge drought that ruins the soybean harvest...

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