ECON 1010 Study Guide - Midterm Guide: Marginal Revenue, Productive Efficiency, Average Cost

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rubyworm345

5 Oct 2019

School

University of Manitoba

Department

Economics

Course

ECON 1010

Professor

Janice R.Compton

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ECON 1010 Full Course Notes

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Related Questions

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

olivewater-buffalo15

1. 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. (2 points each for each correct answer circled below and remaining 7 points for explaining the adjustment process.)

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

indigoalligator885

1. In economy A, all workers agree in advance on the nominal wages that their employers will pay them. In economy B, half of all workers have these nominal wage contracts. In contrast, the other half have indexed employment contracts, so their wages rise and fall automatically with the price level.

A. According to the sticky-wage theory of aggregate supply, which economy has a more steeply sloped short-run aggregate-supply curve?
B. In which economy would a 5 percent increase in the money supply have a larger impact on output in the short run?
C. In which economy would it have a larger impact on the price level in the short run?

2. When output rises, unemployment falls.