Log in
Economics
1
answer
0
watching
182
views

Assume a perfectly competitive firm is in long-run equilibrium and there is a decrease in market demand for the firm's output. Which of the following will occur


a. Existing firms will maintain the original level of output, but they will shift their cost functions down in the short run.

b. Market price will be above its original level.

c. Existing firms will reduce output in the short run.

d. Existing firms will raise price to cover the reduction inquantity demanded and maintain total revenue in the shortrun.

Watch
1
answer
0
watching
182
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Anne Gillian Duero
Anne Gillian DueroLv10
28 Sep 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

66) If the demand for the industry product increases, the total output of the industry in the new short-run equilibrium of a perfectly competitive market will be supplied by A) the initial set of existing firms producing beyond MES. B) any previously exiting firms returning to produce beyond MES. C) new entrants and the initial set of existing firms each producing at MES. D) new entrants with output beyond MES. E) new entrants and the initial set of existing firms each producing slightly below MES.

World palm oil consumption has been in decline over the past several years as consumers have become more sensitive to the destruction of the rainforest to harvest palm oil. Assume that the palm oil industry is perfectly competitive and consists of firms with U-shaped long-run average cost curves. Suppose the industry was in long-run equilibrium before the decline began. Now consider a permanent downward shift in demand for palm oil. Assume this is a constant cost industry. Compared to the original long-run equilibrium, will the market equilibrium price and output per firm rise, fall, or stay the same in the short run? Compared to the original long-run equilibrium, will the market equilibrium price and output per firm rise, fall, or return to the original equilibrium level in the long run? Explain the dynamic adjustment process from the original long-run equilibrium to the new long-run equilibrium. No graph is required. Circle your final answers for price and quantity below.

Short-Run CIRCLE YOUR ANSWER FOR EACH

Market Equilibrium Price will Rise Fall Remain constant

Output per Firm will Rise Fall Remain constant

Long-Run

Market Equilibrium Price will Rise Fall Return to original level

Output per Firm will Rise Fall Return to original level

1) When positive economic profits exist in an industry:

the market price of the good produced by the industry is less than the marginal cost faced by the industry.
the market price of the good produced by the industry is less than the average total cost of the industry.
there is an exit of firms from the industry.
resources flow from less productive uses to that particular industry.

2) When price is less than the firms' minimum average total cost, ________.

firms' profits are likely to be maximum
prices are likely to fall further
new firms will enter the market
existing firms will leave the market

3) The entry of new firms into a perfectly competitive market will cause:

an increase in the profitability of existing firms.
a decrease in the profitability of existing firms.
a right shift of the demand curve of the good being produced by the firms.
a left shift of the demand curve of the good being produced by the firms.

4) Entry of new firms into an existing market causes:

a downward movement along the market supply curve.
a leftward shift of the market supply curve.
an upward movement along the market supply curve.
a rightward shift of the market supply curve.

5) The incentive for new firms to enter into a perfectly competitive market is primarily the:

high level of government intervention in the market.
large number of buyers in the market.
large number of existing firms in the market.
positive profits observed for the existing firms in the market.

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in