the long-run equilibrium, all firms in a perfectly competitive market earn zero economic profit. Explain why this is true using intuition and graphs.
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(b) In the long-run equilibrium, all firms in a
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- According to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.Assume that apples are produced in a perfectly competitive market. Grande’s Orchard is a typical firm that grows and sells apples. Currently, Grande earns zero economic profit, and the market price of apples is $10 per bushel. (a) Draw a correctly labeled graph showing Grande’s demand curve, average total cost curve, and marginal cost curve, and show the profit-maximizing quantity, labeled QG . (b) Suppose an increase in the popularity of apple cider increases the demand for apples. How will the increase in the demand for apples affect Grande’s economic profit in the short run? Explain. (c) What will happen to Grande’s economic profit in the long run? Explain.
- Assume that apples are produced in a perfectly competitive market. Grande’s Orchard is a typical firm that grows and sells apples. Currently, Grande earns zero economic profit, and the market price of apples is $10 per bushel. (a) Draw a correctly labeled graph showing Grande’s demand curve, average total cost curve, and marginal cost curve, and show the profit-maximizing quantity, labeled QG . (b) Suppose an increase in the popularity of apple cider increases the demand for apples. How will the increase in the demand for apples affect Grande’s economic profit in the short run? Explain. (c) What will happen to Grande’s economic profit in the long run? Explain. BoldItalicUnderline(a) What is meant by zero economic profit?(b) What are the conditions that need to be satisfied for a long-run competitive equilibrium?Give an example of a firm which competes in a competitive market. Explain. Suppose that the this market begins in long run equilibrium. Give an example of a factor that would cause the demand curve in this market to shift to the left. How will the market return to the long run equilibrium?
- Suppose that firm is in a breaking even status in a perfectly competitive market. Using graphs (for both industry and firm) to explain how a decline in demand in the short run affects some firms’ performance (e.g., earn profits or experience loss). In the long run, how this results in exit of some firms from the same perfectly competitive market. Comment on the market equilibrium quantity and price in the long run?Avocados have been proven to bring many health benefits if consumed regularly. Many others including Gavin are huge fans of avocados and have plans to start a new business selling avocados. Assume the market for avocados to be perfectly competitive. Answer the following questions: a. If these firms are able to continue entering the market for avocados, it is likely that they are earning an economic profit. In order to earn an economic profit, firms must ensure that the price is above its Type ATC for Average Total Cost, AVC for Average Variable Cost, TC for Total Cost or VC for Variable Cost. b. Gavin decided to build an avocado farm in Brisbane. It is estimated that Gavin will need to spend $14.55 thousand on farming equipment costs. Gavin will also need to spend $20.95 thousand on labour and overhead costs. However, it is expected that Gavin will be able to sell 5 tonnes of avocados and gain revenue of $47.66 thousand from selling these avocados. Calculate the thousand. Answer to the…Assume that a firm in a competitive market faces the following cost information. If the market price for this firm's product is $40, calculate the profit maximizing level of output for this firm using marginal analysis. a.Approximately where do you think the price will end up in this market over the long run? b.Last, instead of assuming a given price, how would you go about finding the equilibrium price if you were given information on market demand?
