Economics Problems

Questions

Create a pair of graphs to show an perfectly competitive industry and firm in long-run equilibrium. Put the graphs side by side and use the same vertical scale for both graphs.
The left-hand side should show the supply and demand for the product. The equilibrium price is $50 and the equilibrium quantity is 10 billion units per week.
The right-hand side should show the average total cost, marginal cost, and demand curves facing the individual firm. The profit maximizing quantity is 2,000 units per week.
Demand
Increases
Show the impact in the short run of the change in demand on your graph.
What happens to the equilibrium price and quantity in the market in the short run?
Both price and quantity increase
Both price and quantity decrease
Price increases and quantity decreases
Price decreases and quantity increases
What happens to the profit maximizing quantity in the short run?
Quantity increases
Quantity decreases
Quantity remains constant
What happens to the number of firms in the market in the long run?
Number increases
Number decreases
Number remains constant
Use your graph to show what, if anything, happens in the long run. Assume that the costs curves do not shift.
The long-run equilibrium price is
Greater than the price in the short run
Less than the price in the short run
Equal to the price in the short run
The long-run equilibrium price is
Greater than the initial price
Less than the initial price
Equal to the initial price.

8. What allows a monopoly to earn economic profit in the long run?
Market power which makes the demand facing the firm have a negative slope
Barriers to entry which keep competitors from entering the market
Both a and b
Neither a or b
Explain why your answer is correct
9. Why does the demand facing a monopoly have a negative slope while the demand facing a perfect competitor has no slope?
10. Would the only cable TV provider in an area be a monopoly? List the characteristics of monopoly and explain how the firm meets or fails to meet each characteristic.

Questions
10. Which output is greater?
A perfectly competitive industry
A monopoly
Assume that all firms maximize profit and have access to the same U-shaped average total cost curve.

11. In your own words, explain what the deadweight loss of a monopoly is and why the competitive output is better..

Economics Problems

Questions

Create a pair of graphs to show an perfectly competitive industry and firm in long-run equilibrium. Put the graphs side by side and use the same vertical scale for both graphs.
The left-hand side should show the supply and demand for the product. The equilibrium price is $50 and the equilibrium quantity is 10 billion units per week.
The right-hand side should show the average total cost, marginal cost, and demand curves facing the individual firm. The profit maximizing quantity is 2,000 units per week.
Demand
Increases
Show the impact in the short run of the change in demand on your graph.
What happens to the equilibrium price and quantity in the market in the short run?
Both price and quantity increase
Both price and quantity decrease
Price increases and quantity decreases
Price decreases and quantity increases
What happens to the profit maximizing quantity in the short run?
Quantity increases
Quantity decreases
Quantity remains constant
What happens to the number of firms in the market in the long run?
Number increases
Number decreases
Number remains constant
Use your graph to show what, if anything, happens in the long run. Assume that the costs curves do not shift.
The long-run equilibrium price is
Greater than the price in the short run
Less than the price in the short run
Equal to the price in the short run
The long-run equilibrium price is
Greater than the initial price
Less than the initial price
Equal to the initial price.

8. What allows a monopoly to earn economic profit in the long run?
Market power which makes the demand facing the firm have a negative slope
Barriers to entry which keep competitors from entering the market
Both a and b
Neither a or b
Explain why your answer is correct
9. Why does the demand facing a monopoly have a negative slope while the demand facing a perfect competitor has no slope?
10. Would the only cable TV provider in an area be a monopoly? List the characteristics of monopoly and explain how the firm meets or fails to meet each characteristic.

Questions
10. Which output is greater?
A perfectly competitive industry
A monopoly
Assume that all firms maximize profit and have access to the same U-shaped average total cost curve.

11. In your own words, explain what the deadweight loss of a monopoly is and why the competitive output is better..