11-Discussion Questions

11-Discussion Questions - Lecture 11: Perfect Competition...

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Lecture 11: Perfect Competition (I) Suggested questions and exercises (Pindyck and Rubinfeld, Ch.8). Questions: 1, 2, 5, 8, 9,10 Exercises: 4, 5, 6, 7, 8 QUESTIONS 1. Why would a firm that incurs losses choose to produce rather than shut down? 2. Explain why the industry supply curve is not the long-run industry marginal cost curve. 5. Why do firms enter an industry when they know that in the long run economic profit will be zero? 8. An increase in the demand for video films also increases the salaries of actors and actresses. Is the long-run supply curve for films likely to be horizontal or upward sloping? Explain. 9. True or false: A firm should always produce at an output at which long-run average cost is minimized. Explain. 10. Can there be constant returns to scale in an industry with an upward-sloping supply curve? Explain. EXERCISES 4. Suppose you are the manager of a watchmaking firm operating in a competitive market. Your cost of production is given by C = 200 +2 q 2 , where q is the level of
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This note was uploaded on 11/30/2010 for the course ECON 251 taught by Professor Tontz during the Fall '10 term at USC.

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11-Discussion Questions - Lecture 11: Perfect Competition...

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