Consider perfect competition: a) Identify two distinct reasons why a long-run supply curve for an industry...

Consider perfect competition:

a) Identify two distinct reasons why a long-run supply curve for an industry of perfectly competitive firms would be upward-sloping instead of horizontal.

b) Very briefly explain the conditions under which a perfectly competitive firm would choose to operate at a loss in the short run, and support your explanation with an appropriate diagram correctly illustrating relevant cost curves and ranges of output prices.

Expert Solution

Rahul Sunny answered 2 years ago

Perfect Competition In the lecture I defined the long run market supply as being determined by...

Perfect Competition In the lecture I defined the long run market supply as being determined by the quantity demanded at the break-even price. Including any necessary graphs, explain what I meant by and how an upward sloping (increasing cost industry) long run supply curve is generated.

Why is the short run supply curve relatively more inelastic than the long run supply curve?

On a diagram, show the long-run equilibrium for both firm and industry under perfect competition. Now...

On a diagram, show the long-run equilibrium for both firm and industry under perfect competition. Now assume that the demand for the product rises. Show the new short term effects and discuss what might happen after the market responds.

Question 15 The short-run supply curve to a firm operating under perfect competition is most accurately...

Question 15 The short-run supply curve to a firm operating under perfect competition is most accurately described as the segment of the: A. marginal cost (MC) curve above the average variable cost (AVC) curve. B. marginal cost (MC) curve below the average total cost (ATC) curve. C. average total cost (ATC) curve above the average variable cost (AVC) curve. D. marginal cost (MC) curve. question 17 Which of the following factors of production is least likely to be fixed in...

In the long run in a competitive constant-cost industry A. A firm’s supply curve is upward...

In the long run in a competitive constant-cost industry A. A firm’s supply curve is upward sloping but the industry supply curve is perfectly elastic at the minimum of AVC. B. firm’s supply curve is upward sloping but the industry supply curve is perfectly elastic at the minimum of ATC. C. Both the industry and a firm’s supply curve are perfectly elastic at the minimum of ATC. D. The supply curve for a firm is perfectly elastic at the minimum...

a) Identify three types of industries that fit into the Perfect Competition industry. Justify why you...

a) Identify three types of industries that fit into the Perfect Competition industry. Justify why you would classify each one into Perfect Competition. b) What happens in the long run to existing companies in an industry? To the new companies in the industry and to the industry as a whole? What will happen to the price and average costs in the long run?

In the situation of perfect competition, in long run equilibrium which of the following is not...

In the situation of perfect competition, in long run equilibrium which of the following is not true: the marginal cost curve intersects the average cost curve at the minimum point of the average cost curve. average costs are equal to the market price of the good. average costs are equal to marginal revenue. the demand curve facing the individual firm has a downward slope. Assuming long-run equilibrium exists, when demand increases in a perfectly competitive market, in the long run...

Answer the following questions comparing monopolistic competition to perfect competition. a. In the long run, how...

Answer the following questions comparing monopolistic competition to perfect competition. a. In the long run, how does the profit earned by a firm operating in a monopolistically competitive market compare to the profit the same firm would earn if it were instead operating in a perfectly competitive market? Please explain. b. In the long run, how does the average cost of production for a firm operating in a monopolistically competitive market compare to the average cost of production for the...

Describe and illustrate the difference between perfect competition and monopolistic competition in the long run. Comment...

Describe and illustrate the difference between perfect competition and monopolistic competition in the long run. Comment on long run profit, price sensitivities that firms are responding to as well as welfare and efficiency outcomes in both cases.

Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why?

Question