Question

In: Economics

Suppose that the typical firm in the perfectly competitive silk scarf market has a long run...

Suppose that the typical firm in the perfectly competitive silk scarf market has a long run average

total cost curve that attains its minimum value at q=50 and at an average total cost of $25. The typical

firm’s average variable costs are minimized at q=25 and an average variable cost of $15. The market

demand for silk scarves is: QD = 10,000 – 100P. In a long run market equilibrium, how many firms

will there be?

A. N* = 300

B. N* = 150

C. N* = 50

D. N* = 0

E. N* = 100

Assume all fixed costs are sunk. The short run supply curve for a perfectly competitive firm is

A. the portion of its short run marginal cost curve that lies above its short run average total cost

curve.

B. the portion of its short run marginal cost curve that lies above its average variable cost curve.

C. the portion of the average variable cost curve that lies above its short run marginal cost curve.

D. the portion of its short run marginal cost curve that lies above its average fixed cost curve.

E. the portion of its short run average total cost curve that lies above its short run marginal cost

curve.

32. In which of the following circumstances would a cartel between firms be most likely to work?

A. The coffee market, where the product is standardized and there are a large number of coffee

growers.

B. The market for copper, where there are very few producers and the product is standardized.

C. The automobile industry, where there are few producers but there is great product differentiation.

D. The fast-food market, where there is a large number of producers but the demand for fast food is

inelastic.

E. The market for mozzarella cheese where they are only a few firms with very different marginal

cost structures.

Solutions

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