Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer. 2. Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Using your graph, determine whether this firm will shut down in the short run, or choose to remain in the market.

Use a graph to demonstrate the circumstances that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer. 2. Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Using your graph, determine whether this firm will shut down in the short run, or choose to remain in the market.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Firms In Competitive Markets

Section13.2: Profit Maximization And The Competitive Firm's Supply Curve

Problem 2QQ: How does a competitive firm determine its profit-maximizing level of output? Explain. When does a...

See similar textbooks

Similar questions

Use a graph to show the situation that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer.
you've been learning about what makes a market perfectly competitive, how a firm in a perfectly competitive market makes profit-maximizing decisions, and how a perfectly competitive market moves towards equilibirium. But how applicable is this to real life? For this discussion, try to think of a market (for a product or service) that is perfectly competitive or very close to it. What characteristics of the market make it like perfect competition? Are there factors that keep it from being perfectly competitive? If so, what are they? How close do you think the firms in this market are to perfectly competitive firms in choosing equilibrium price and quantity?
Write True or False and explain briefly 1- Consider a firm in a perfectly competitive market.There are situations where it is optimal for the firm to continue operating in the short-run , but shut down in the long-run. 2- Consider a firm in a perfectly competitive market.There are situations where it is optimal for the firm to shut-down in the short-run , but continue to operate in the long-run.
The following graph shows a firm’s marginal cost and average cost of production of raspberries. a. The equilibrium price at this market is $2.5. At this price, is the firm earning economic profit or is itincurring economic losses?b. Is the firm operating in a competitive market based on the given information? Why?c. Suppose the price of raspberries increases to $5. How would you answer a. and b. in this case?d. If the market is indeed competitive, what will happen after the price increase in c.? What will bethe final price and the long-term profit of the firm?
Suppose the book-printing industry is a competitive market, and it begins with a long run competitive equilibrium. a. Draw side-by-side diagrams to show the initial conditions of the bookprinting industry, including the condition of a typical book-printing firm and the whole industry. b. Given the rising popularity of e-books, the demand for book-printing drops. Based on the diagrams in (a), illustrate the short run effects on the market price, market output level, output level of an typical bookprinting firm and her profit. Briefly explain.
Use a graph to demonstrate the scenario where a competitive firm would be earning positive profit in the short run. Can this scenario be maintained in the long run? Why? What are the ‘shutdown point’ and ‘break even point’ of a competitive firm . Explain with diagram. A competitive market starts in a situation of long run equilibrium. Then there is an increase in demand. Explain what happens in the short run and long run, using necessary diagrams.
The accompanying graphs represent the market for soybeans, a perfectly (purely) competitive market, and Roy's Soys, an individual firm in the market for soybeans. The market and the firm are currently in long‑run equilibrium at point A. Show what happens in the short run on both graphs when a new medical study shows soybeans to be highly carcinogenic. On the market graph, you will shift a curve or curves. On the firm's graph, use Price 2 to draw a new price line for the firm. On both graphs, indicate the new equilibrium point with point B. Now, show the changes that get both graphs back to long‑run equilibrium. Use shift(s) for the market and Price 3 for the firm. Indicate the new long‑run equilibrium with point C.
The following graph summarizes the demand and costs for a firm that operates in a perfectly competitive market. a. What level of output should this firm produce in the short run? b. What price should this firm charge in the short run? c. What is the firm’s total cost at this level of output? d. What is the firm’s total variable cost at this level of output? e. What is the firm’s fixed cost at this level of output? f. What is the firm’s profit if it produces this level of output? g. What is the firm’s profit if it shuts down? h. In the long run, should this firm continue to operate or shut DOWN
Suppose that you have a management job at a firm like Estrella River Ranch, a beautiful vineyard and one of more than 200 vineyards growing cabernet sauvignon grapes in California. Assume that the market is perfectly competitive. Also, assume that you cannot instantly change production when demand changes, and grapes cannot be stored, so your firm must sell all of the grapes it grows. The adjacent figure (Figure A) shows the situation at your California vineyard. If demand is high, the price is $3,000 per ton of grapes, and if the price is low, the price is $1,000 per ton of grapes. Producing 300 tons of grapes maximizes your firm's expected profit. Suppose that there is no fixed cost. If demand is high and your firm produces 300 tons of grapes, its economic profit on the tons of grapes between 100 and 300 tons is $ If demand is low and your firm produces 300 tons of grapes, its economic loss on the tons of grapes between 100 and 300 tons is dollars. (Enter a negtive sign to indicate a…
Draw a graph of a typical firm and an industry market (with supply and demand). Illustrate and explain what happens in the market if at the initial price, the typical firm is earning an economic profit. Show and explain how the two graphs will adjust toward market equilibrium.
Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. Using your graph, determine whether this firm will shut down in the short run, or choose
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?