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- What are the Characteristics of a Purely Competitive Market?explain your answers in detail and use graphs whenever appropriate: The market for rental cars is very competitive. How would the following developments affect the quantity of car rentals that a typical rental car company wants to supply in the short run? a. With the easing of fears about Covid 19, people are more excited to travel than before. b. Local governments reduce the yearly fee that rental car companies have to pay for their facilities. Note, these fees do not vary with how many cars the company rents. c. Rental car companies have to pay higher wages for their workers. Suppose that initially the market for rental cars is in long-run equilibrium. a. What does the fall in the yearly fee rental car companies have to pay for their facilities do to the profits of a typical rental car company in the short run? b. What will happen to the equilibrium price and quantity of rental cars in the long run? Why? What will happen to the profits of a typical rental car company in the long run?What are the four conditions of a purely competitive market?
- 3 The graph below shows the costs and revenue curves for Dollar-Daze, a typical profit-maximizing firm in a perfectly competitive market producing Good X. Answer the following questions based on the graph below d. As the market for Good X moves into the long-run equilibrium, explain what will happen to the price of Good X and why.e. Assume the cross-price elasticity of demand between Good X and Good B is positive, what will happen to the quantity demanded of Good B given the change in the long-run price of Good X in part (d)?Assume that the market for pasta is in long-run equilibrium and that the pasta industry is a constant-cost industry. Explain with a graph and words what will happen to the price and quantity in the market when the demand for pasta decreases.A new korean restaurant opens in a city. People are initially cautious about eating newfood items, until an influential health report warns consumers against korean foodsuggest that they decrease their consumption of Korean foods. As a result, demand forKorean cuisine decreases dramatically.Assuming that the market for Korean food is perfectly competitive, answer thequestions below.a. In the story above, what should have happened to the short-run economic loss of theKorean restaurant as a result of the health report?b. Assuming that demand remains low, what do you anticipate will happen to thenumber of korean restaurants in the city over the long run?c. Would you predict that the first korean restaurant would be able to still running inloss over the long run? Explain your answer.d. Using one graph of the market as a whole and one graph of a representative firm'scost curves, illustrate your answers to parts a - c. (Draw diagram of a, b and c and labelyour diagram).e. Local…
- A new korean restaurant opens in a city. People are initially cautious about eating newfood items, until an influential health report warns consumers against korean foodsuggest that they decrease their consumption of Korean foods. As a result, demand forKorean cuisine decreases dramatically.Assuming that the market for Korean food is perfectly competitive, answer thequestions below.a. In the story above, what should have happened to the short-run economic loss of theKorean restaurant as a result of the health report?1.Describe any four requirements for a perfectly competitive goods market.What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be A. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market. B. many buyers and nothingsellers, with all firms selling identical products, and substantial barriers to new firms entering the market. C. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market. D. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.
- What is a price taker? A price taker is A. a firm with a perfectly inelastic demand curve. B. a firm that has the ability to charge a price greater than marginal cost. C. a firm that is unable to affect the market price. D. a firm that does not seek to maximize profits. E. a firm with a downward-sloping demand curve. When are firms likely to be price takers? A firm is likely to be a price taker when A. it has market power. B. firms in the industry collude. C. it sells a differentiated product. D. it represents a small fraction of the total market. E. barriers to entry are substantial.“An upward – sloping demand curve doesn’t make sense in my business. All I know is that if I raise my prices, revenue doesn’t go up, it goes down. I don’t sell more products, I sell less. “Can you straighten out this business man’s thinking?At that equilibrium, what is price? what is the output? what is the total profit?
