ECO205Y5 Chapter Notes -Market Price, Market Participant, Deadweight Loss

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champagnefish328

24 Aug 2013

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Chapter 9 perfect competition in a single market. When determining equilibrium prices it is important to consider the time frame in which there is a supply response. Supply response - the change in quantity of output supplied in response to a change in demand conditions. Market period - a short period of time during which quantity supplied is fixed. In the very short run, there can be no supply response quantity supplied is absolutely fixed. In the short run, existing firms may change the quantity they are supplying but no new firms can enter the market. In the long run, firms can further change the quantity supplied and completely new firms may enter a market; this produces a very flexible supply response. In the very short run or market period, there is no supply response. The goods are already in"" the marketplace and must be sold for whatever the market will bear.

Related Questions

Which of the following will increase the short-run aggregate supply?

A. an increase in wages

B. a decrease in the price of capital

C. an increase in government spending on education

D. an increase in consumption spending

All the following explain price stickiness except

Question 2 options:

A. firms choose not to adjust prices until they can assess if changes in sales are temporary or permanent.

B.the more firms produce, the lower the average cost of production. Therefore, firms are willing not raise prices as long as they can sell more.

C. firms may be concerned that consumers may be angered by price increases.

D. firms may be concerned that their rivals may not match their price increases.

3. A movement along the short-run aggregate supply curve in response to a change in the price level is called a

	A. determinant of aggregate supply.
	B. revealed cost on aggregate supply.
	C. change in aggregate supply.
	D. change in the aggregate quantity of goods and services supplied.

Suppose that each firm in a competitive industry has the following costs:

Total Cost: TC=50+1/2 q2

Marginal Cost: MC=q

where q is an individual firm's quantity produced.

The market demand curve for this product is:

Demand QD=140-2P

where P is the price and Q is the total quantity of the good.

Each firm's fixed cost is $__________

What is each firm's variable cost?

_______ 50+1/2q

_______1/2q

_______q

_______1/2q2

Which of the following represents the equation for each firm's average total cost?

_____ 50/q

_______ 50/q+1/2q

_______1/2q

_______50+1/2q

Complete the following table by computing the marginal cost and average total cost for from 5 to 15.

5
6
7
8
9
10
11
12
13
14
15

The average total cost is at its minimum when the quantity each firm produces (q) iquals ________

Which of the following represents the equation for each firm's supply curve in the short run?

_______1/2q2

______q

_____50-q

_____120-1/2q2

In the long run, the firm will remain in the market and produce if________

Currently, there are 8 firms in the market.

In the short run, in which the number of firms is fixed, the equilibrium price is__________ In the short run, in which the number of firms is fixed, the equilibrium price is

________units. Each firm produces ________ nits. (Hint: Total supply in the market equals the number of firms times the quantity supplied by each firm.)

In this equilibrium, each firm makes a profit of _______ . (Note: Enter a negative number if the firm is incurring a loss.)

Firms have an incentive to EXIT/ENTER the market.

In the long run, with free entry and exit, the equilibrium price is _______and the total quantity produced in the market is__________units. There are ________

firms in the market, with each firm producing _________units.

orchidbadger835

The market for good X is perfectly competitive. The demand and supply functions of good X are given as follows: Demand: Qd = 6000 - 30 P Supply: Qs =500 + 20 P Qd is the quantity demanded in thousand units, Qs is the quantity supplied in thousand units, and P is the unit price in dollars for good X. Currently, there are 1000 identical profit-maximizing firms in the market and the production cost of each firm does not depend on the total number of firms in the market. Currently, the market is in long-run equilibrium.

a. What are the equilibrium market price and market quantity for good X? Briefly explain your answer.

b. What is the output of each firm in this long-run equilibrium? Briefly explain your answer.

c. Now suppose that the government requires each firm in this market to pay $10,000 company registration fee. After paying this fee, a firm can produce whatever output it wants. In other words, this fee will not change with the production of a firm.

i. Briefly explain how this registration fee will affect the market equilibrium output and price in the short run. ii. Briefly explain how this registration fee will affect the market equilibrium output and price in the long run.

turquoisegnat879

ECO205Y5 Chapter Notes -Market Price, Market Participant, Deadweight Loss

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