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Avoid the Hustle

Economics

Category: Economics

The following incomplete tables shows two competitive firms’ various costs of producing output.

a) Complete the table for FIRM A

n-

nn-
fl-
n-

b) Complete the table for FIRM B

n-
n-

II-

c) Assume the market for this product is perfectly competitive and the current market price is $28.

Determine the quantity produced by each firm and their economic profit/ loss. Explain your answer.

d) What will happen to this market in the long run and why?

e) Now suppose that the market price falls to 5516. Do both firms make economic profit? Explain why.

i) If one or both of them makes an economic loss, would they shut down temporarily?

ssume t ese two 1rms now are act two actories 0 one co oration, an e co oration can
A h f ually f ‘ f rp ‘ d th rp
operate either one or the other at a time. Using the two tables above, determine which factory should be
in operation to produce up to a certain level of output. What is this level of output?
h) Explain your answer to (g).
Assume that the world market for wheat is perfectly competitive.

a) Use a landscaped A4 page to demonstrate the world market for wheat in long run equilibrium
conditions. The market for wheat is to be on the left, and a representative farm (firm) is to be on
the right.

b) Explain and discuss the long run conditions above.

c) Illustrate on this diagram, the short run impact of a growing world population.

d) Explain and discuss your answer to

e) Re-draw your diagram in (c). Illustrate on this new diagram what would happen in the long run.

f) Explain and discuss your answer to (e).

g) Explain and discuss what could prevent your answer to (f) from occurring and why.

h) Explain and discuss what strategies a firm in this situation could adopt to retain what it is losing
in (e) and (f).
Assume that the Sydney clothing market is monopolistically competitive.

a) Use half an A4 page to illustrate a representative firm in monopolistic competition in long run
conditions.

Assume that clothing stores in Macquarie Centre sign 24 month leases with the shopping centre.

Further assume that there is a clause in the lease contract that allows Macquarie Centre to increase

the monthly rent every 6 months of a signed 24 month lease, in line with market conditions. Even if

the rent is re-adjusted (in line with market conditions every 6 months) according to the contract, the

lease term still remains at 24 months.

b) Re-draw your diagram from (a). Show on this new diagram the immediate impact of an increase
in rent as described in the situation above.

c) Explain and discuss your answer to

d) Explain and discuss the short run decision-making process of the firm, given the situation in (b)
and

e) Re-draw your diagram in Show on this new diagram the long run impact.

f) Explain and discuss your answer to (e).

Assume that the Retail Store Workers’ Union successfully bargains for an increase in casual staff

wage rates, despite no proven improvements in worker productivity.

g) Re-draw your diagram in (a). Show on this new diagram the immediate impact of an increase in
casual staff wage rates.