ECON 2106: HW 3
To find the long-run number of firms in a competitive market,
2) divide the industry output (Q*) by the optimal scale (q*).
Which of the following lists the correct sequence of events that will take place when a perfectly competitive firm earns a negative profit?
2) firms exit, supply shifts in, price rises, profits reach zero
If profits are positive in a perfectly competitive industry, what will happen as we adjust to long-run equilibrium?
2) firms will enter and shift supply out which will decrease price to the point where all firms break even.
An effective price ceiling
2) is set below the equilibrium price
Which of the following industry characteristics will lead to a firm earning zero profit in the long-run?
2) no barriers to entry
Which of the following best describes the adjustment in a decreasing cost industry in long-run equilibrium after an INWARD shift in demand?
2) price falls, firms exit, supply shifts in, price rises to above the original level where firms earn zero profit.
If an increase in wages raises the cost of producing lawnmowers, then
2) supply will shift in causing equilibrium price to rise and equilibrium quantity to fall
The long-run supply curve is downward sloping for what type of industry?
2) a decreasing cost industry.
Jim operates in a perfectly competitive, increasing cost industry with MC = 5q and a market price of $15. How much profit do you expect Jim to earn in the long-run?
1) $0
The supply and demand in the market for canned corn are given by the following functions: QD = 37,500 - 10,000P QS = 10,000 + 3,750P The equilibrium price and quantity in this market are
1) Q* = 17,500 ; P* = 2
The supply and demand in the market for tires are given by the following functions: QD = 500 - 2P QS = 100 + 3P At a price of $100 per tire, there is a
1) surplus of 100 units
The supply and demand in the market for canned corn are given by the following functions: QD = 37,500 - 10,000P QS = 10,000 + 3,750P At a price of $3 per can, there is a
1) surplus of 13,750 units
A price floor at $7 in the market in the graph would cause a _____ of ______ units.
1) surplus; six
Which of the following is a potential result of a price floor?
1) a black market in which producers offer to sell goods for a lower price.
The idea that no economic agent can be made better off without harming another is known as
2) Pareto efficiency
In equilibrium in the market in the graph, producer surplus is equal to
3) $12
How much deadweight loss would result from a price ceiling set at $3 in the market in the graph?
3) $6
Goods A and B are complements. If the price of good B decreases, then we should expect to see
3) an increase both equilibrium price and quantity for good A.
When the price of maple syrup rises, what should we expect to happen in the market for maple furniture?
3) the equilibrium price of furniture will rise and the equilibrium quantity will fall
The long-run supply curve is horizontal in which type of industry?
3) a constant cost industry
Which of the following is an example of a price ceiling?
3) a government limits the amount that can be charged for rent on inner-city apartments
A firm earning zero profit will
3) continue to operate regardless of whether it is in the long-run or short-run.
Whenever an industry fails to produce output for which someone would have been willing to pay more than the marginal cost of production, we get
3) deadweight loss
Suppose that an effective price floor on milk is removed. This would cause the
3) price to decrease and the quantity exchanged to increase
In equilibrium in the market in the graph, consumer surplus is equal to
4) $12
In the perfectly competitive market for widgets, demand is given by P = 5,000 - 0.01Q, LRAC reaches its minimum at $5 and optimal scale is 15 units. How many firms will be in this industry in the long-run?
4) ) 33,300
The equilibrium price and quantity in the market in the graph are given by:
4) P*=5; Q*=6
If demand shifts outward in a perfectly competitive decreasing cost industry operating in the long-run then, as we adjust to the new long-run equilibrium, we would expect the price to
4) fall as quantity rises
If there is a hurricane in Florida, then
4) the demand for hotel rooms in Georgia will shift out
If a market has attained Pareto efficiency, then
4) the sum of consumer and producer surplus has been maximized
A price ceiling at $9 in the market in the graph would cause a ______ of _______ units.
5) a price ceiling at $9 would have no effect on this market.
When a perfectly competitive market is in long run equilibrium,
5) all of the above
Whenever profits are positive in a perfectly competitive market,
5) all of the above
Which of the following is NOT a potential effect of an increase in the minimum wage?
5) all of the above could result from an increase in the minimum wage.
Whenever profits are positive in a perfectly competitive market,
5) all of the above.