Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 8, Problem 10RQ
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Identify the constant returns to scale with an upward-sloping supply curve.
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For each of the following events identify which of the determinates of demand or supply are affected. Also indicate whether demand or supply is increased or decreased. Why?
A stock market crash lowers people’s wealth.
Batelco increases the prices of mobile services.
Diminishing returns mean rising costs while economies of scale mean falling costs. Therefore, a firm cannot be facing both diminishing returns and economies of scale. Do you agree? Why or why not?
Why will a firm never plan to supply an output at which it has increasing returns to scale?
The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a
competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical
axis (quantity-0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to drawit.
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Chapter 8 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
Ch. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQ
Ch. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Suppose you are the manager of a watchmaking firm...Ch. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - A sales tax of 1 per unit of output is placed on a...Ch. 8 - Prob. 15E
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- “The firm’s entire marginal cost curve is its short-run supply curve.” Is the preceding statement true or false? Why?arrow_forwardFor a perfectly competitive firm to operate and produce an output level in the short-run, the firm's Price must be greater than, or equal to, what cost for the firm?arrow_forwardExplain why there is no profit-maximizing level of output for a firm with increasing returns to scale. What does this imply in reality?arrow_forward
- (a) Let the industry producing soybeans be in a long-run equilibrium. What is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel of soybeans? (b) Suppose that the demand for soybeans drops due to decreased im- port by China and becomes Q = 15.3 − p. In a new long run equilibrium, what is the equilibrium price of a bushel of soybeans? How many billions of bushels are produced? How many farmers are there in the industry? What is the shipping fee per bushel? (c) Calculate the change in the producers’ surplus between the situations described in (a) and (b). (d) Show that the decrease in the producers’ surplus equals to the decrease in the total shipping fees as the industry contracts incrementally from the equilibrium output in (a) to the equilibrium output in (b).arrow_forwardDistinguish between short-run and long-run supply curves.arrow_forwardAssume the following cost data are for a purely competitive producer: In the table below, complete the short-run supply schedule for the firm (columns 1 and 2) and indicate the profit or loss incurred at each output (column 3).arrow_forward
- The total cost function of a perfectly competitive firm is TC=100+10*Q+5*0^2 For what time period does the function apply? What is the equation of the marginal cost function? If the market price is 50, what is the optimal production quantity of the firm? What is the value of total revenue at the profit maximum? What is the value of total cost at the profit maximum? Will be negative or positive value of the profit at the profit maximum? In the short run, does the company decide to produce (at profit max level)? Which minimum value indicates the shutdown point? Use the following set of options to answer the above questions: long run 100 short run AVCmin ACmin maybe 4 220 positive yes MCmin no 100 years 10+5*Q 200 10+10*Q Qminarrow_forwardIllustrate and explain how the short-run supply curve of a price-taking firm is determined.arrow_forwardConsider the perfectly competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. 100 90 90 70 60 50 40 ATC 30 20 AVC 10 MC O 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of tons) COSTS (Dollars per ton)arrow_forward
- In the short-run, if the marginal cost of a firm in a competitive industry is increasing while its average variable cost is downward sloping, what can you say about slope of average total cost?arrow_forward1) Graphite is an input into the production of pencils. If the pencil market is perfectly competitive, then in the short-run an increase in the price of graphite will cause: (a) The supply curve for pencils to shift up: True or False? (b) An increase in the market price for pencils. True or False? (c) The demand curve for pencils to shift down. True or False? For each of (a), (b), and (c) above, indicate whether the statement is True or False? Explain each briefly. Provide a graph illustrating your answerarrow_forwardSuppose that each firm in a competitive market has the following cost structure: TC=100+q². MC=2q The market demand and supply functions are: Q-120-p, 11p-Q Compute the equilibrium price in this market in the short-run. (Enter your answer to one integer. For "87", you would write 87.arrow_forward
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