Suppose the wiz-pop market is in long-run equilibrium. Suddenly, fixed costs decrease, although variable costs remain unchanged. Discuss the short-run and long-run changes in market equilibrium.
What will be an ideal response?
The reduction in fixed costs reduces the average cost of production and thus decreases the efficient scale of production. In the short run, marginal costs do not change and the number of active firms is fixed, resulting in no change in the short run equilibrium. Thus, active firms make a positive profit in the short run. In the long run, new firms enter the market to take advantage of the profit opportunities. New firms continue to enter the market until profits are driven to zero. The entrance of new firms increases the long run supply, pushing down the price of the good and increasing the amount produced in the market.
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All of the following can be true about the optimal basket consumed by a consumer, except
a. The basket is on the budget line. b. The person is spending all of their money on the basket. c. The basket is on the highest indifference curve. d. The budget line is tangent to an indifference curve at the optimal basket.
The World Bank primarily engages in
A) short-term lending aimed at helping developing nations repay debt accumulated in past years. B) short-term lending aimed at helping developing nations repay loans from the International Monetary Fund. C) long-term lending aimed at helping developing nations' governments and businesses make investments that will contribute to economic growth. D) long-term lending aimed at helping developing nations' governments and central banks keep exchange rates from varying.
Does the gross domestic product account measure the market value of all goods and services?
A) No, because that would include double-counting. B) Yes, because the data is readily available. C) Yes, except for illegally exchanged goods and services. D) Yes, otherwise the gross domestic product accounting system is not a reliable indicator of economic activity.
Provide an example of each allocation method that illustrates when it works badly
What will be an ideal response?