CHAPTER 14 FIRMS IN COMPETITIVE MARKETS 313 b. Calculate marginal revenue and marginal cost for each quantity. Graph them. (Hint: Put the points between whole numbers. For example, the marginal cost between 2 and 3 should be graphed at 2 1/2.) At what quantity do these curves cross? How does this relate to your answer to part (a)? c. Can you tell whether this firm is in a competitive industry? If so, can you tell whether the industry is in a long-run equilibrium? 7. From The Wall Street Journal (July 23, 1991): “Since peaking in 1976, per capita beef consumption in the United States has fallen by 28.6 percent . . . [and] the size of the U.S. cattle herd has shrunk to a 30-year low.” a. Using firm and industry diagrams, show the short-run effect of declining demand for beef. Label the diagram carefully and write out in words all of the changes you can identify. b. On a new diagram, show the long-run effect of declining demand for beef. Explain in words. 8. “High prices traditionally cause expansion in an industry, eventually bringing an end to high prices and manufacturers’ prosperity.” Explain, using appropriate diagrams.
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