problemSet06 - ECONOMICS 100 PROBLEM SET #6 Short and Long...

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ECONOMICS 100 PROBLEM SET #6 Short and Long Run Competition, Monopoly and Other Markets This Problem Set will be taken up in tutorials during the first week back in January. 1. Constant Cost Perfectly Competitive Industry Consider a cabbage growing industry which is perfectly competitive and which has a large number of firms with identical cost curves. Assume each firm uses two factors of production: land, which is fixed in the short run and variable in the long run; and labour, which is variable in both the short and the long run. Use diagrams to determine the impact of an increase in the price of land, assuming that the long-run supply curve of the cabbage industry exhibits constant costs. In particular, show the impact on: * the price, output, and profit of the individual firm in the short and long run, * the price and output of the industry in the short and long run. Start from a point of long run equilibrium. 2. Short and Long Run Cumquats are produced in a perfectly competitive industry consisting of a large number of identical and independently managed firms. All inputs, including labour, are available to the cumquat industry at unchanged input prices. The industry is initially in long run equilibrium with each firm earning normal profits. With the aid of carefully labelled diagrams, examine the full impact on the industry and on a typical firm of each of the following changes, taken separately. 2.1
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problemSet06 - ECONOMICS 100 PROBLEM SET #6 Short and Long...

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