All the supply of peppermint oil is produced from mint plants grown in one county by several competitive growers (the number of growers is not limited). The quality of land in the county varies greatly. Would you expect the long-run market supply curve to slope upward, downward, or remain constant? Why? What will be an […]
Suppose all firms in a competitive market are currently in both short-run and long-run equilibrium. What impact will a lump sum tax have on each firm in the short run? in the long run? What will be an ideal response? ANSWER In the short run, the lump sum tax represents a fixed cost. The […]
The long-run supply curve in a competitive market is upward-sloping. Indicate whether the statement is true or false ANSWER False. The shape of the long-run supply curve will depend on how similar the firms are and on the relationship between factor prices and total industry output.
If the government regulates a natural monopoly by forcing the firm to set price equal to marginal cost, A) the firm will earn a negative economic profit. B) the firm will earn zero economic profit. C) the firm will earn a fair economic profit. D) the firm will earn a positive and large economic profit. […]
Suppose the long-run supply curve for a perfectly competitive industry is horizontal at a price of $12, and the minimum short-run average variable cost for each of the identical N firms in the industry is $8. If the demand curve for the industry decreases so that it intersects the short-run supply curve of the industry […]
The residual supply curve is the ________ the market ________ that is ________ by other demanders at any given price. A) supply; consumes; also consumed. B) quantity; supplies; consumed. C) quantity; supplies; not consumed. D) quantity; demands; consumed. ANSWER C
If the shutdown rule, p < AVC, is the same in the short run and the long run, explain why the shutdown prices may be different. What will be an ideal response? ANSWER In the short run there are fixed costs, but in the long run all costs are variable. In the long run […]
What is the elasticity of residual supply faced by the USA in the cashew juice market, where the market supply elasticity is 1, the elasticity of demand of the other countries is -2, and the U.S. imports 10% of the world’s cashew juice production? A) 14 B) 20 C) 28 D) 34 ANSWER C […]
Under what circumstances will the residual supply curve for a country be upward sloping? A) when it does not import any of the good from the rest of the world B) when it imports a small portion of the rest of the world’s supply of the good C) when it imports a large portion of […]
If firms in a competitive market are identical, the long-run market supply curve is horizontal. Indicate whether the statement is true or false ANSWER False. The horizontal long-run supply curve also requires that factor prices do not increase with industry expansion and that the number of firms is not restricted.
