YOU MUST COMPLETE THREE OF THESE MINIMUM AND SUBMIT! I WILL CHOOSE ONE OF THESE AS THE ACTUAL FIANL EXAM GRAPHING
QUESTION!
1. A retail industry is perfectly
competitive and in long-run equilibrium.
(A) The wholesale
price increases. Explain what happens initially to the retail industry’s output and price.
(B) In reaction to the changes above, the government imposes a retail price
ceiling on the product at its original price level. What will be the effect of the price ceiling on the quantity demanded
and supplied in the retail industry?
(C) Given the effect
of the price ceiling on the typical firm’s profits, will firms in the retail industry have an incentive to enter or
exit this industry in the long run? Explain.
2. A
perfectly competitive manufacturing industry is in long-run equilibrium. Energy is an important variable input in the
production process and therefore the price of energy is a variable cost. The price of energy decreases for all firms
in the industry.
(A) Explain how and why the decrease
in this input price will affect this manufacturing industry’s output and price in the short run.
(B) What will be the short-run effect on price, output, and profit of a
typical firm in this manufacturing industry?
(C) Will
firms enter or exit this manufacturing industry in the long run? Why or why not?
3. Two goods, coffee and cream, are complements. Due to a natural disaster in Brazil that
drastically reduces the supply of coffee in the world market the price of coffee increases. Explain the effect of this
increase in the price of coffee on each of the following.
(A) The
equilibrium price and quantity sold of cream
(B) The
supply and demand for workers who produce cream
4. Peaches
and nectarines are substitute goods, and both are produced under conditions of competitive long-run equilibrium.
(a) Joyce, a producer in the peach industry, discovers a technological
breakthrough that only reduces the cost of producing peaches. Explain how the change in technology will affect each
of the following for Joyce.
(i) Quantity of Peaches
(ii) Price of Peaches
(iii) Short-run
Profits
(b) Now assume that all other peach-producing
firms adopt the new technology. Explain how the adoption of the new technology will affect each of the following in
the peack-producing industry.
(i) Price of peaches
(ii) Quantity of peaches produced
(c) This new technology is not applicable to the production of nectarines. Explain how the
changes that occurred in the peach industry will affect each of the following in the nectarine industry.
(i) Price of nectarines
(ii) Quantity
of nectarines
5. In
the country of Lola, sugar had always been produced in a perfectly competitive industry until a dictator seized power and
monopolized the production of sugar.
(a) Draw a graph
that shows the output and price the monopolist would choose to maximize profits.
The people of Lola revolt, imprison the dictator, and repeal the law restricting the number
of sellers of sugar.
(b) Explain two
conditions that might lead to an increase in the number of sugar sellers after the repeal of the law.
(c) Describe how an individual seller would determine the profit-maximizing output level of sugar
if the sugar industry were perfectly competitive.
(d) Given
your answers in parts (a) and (c), is the repeal of the law likely to make the sugar industry more efficient? Why? In
your explanation be sure to include an explanation of economic efficiency.
