{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# HW12S_302 - Econ 302 Solution to Problem Set 12 Spring...

This preview shows pages 1–2. Sign up to view the full content.

Econ 302- Solution to Problem Set 12 Spring 2010-Ali Toossi Due: Wednesday April 28 at the beginning of the class Chapter 11: Questions for review Answer to question 4. Price = TR/Q, so this firm's demand curve is given by P=a - 2Q. Since its price is a declining function of output, it cannot be a perfectly competitive firm. Answer to question 8. The effect of such a tax is to produce a parallel upward movement in each firm's long-run average cost curve. The output level for which the minimum value of LAC occurs will thus be the same as before, which means that firms in long-run equilibrium will each have the same amount of output as before. So true. Answer to question 9. A firm will have a long-run marginal cost function that is above average cost for all points past the minimum point on the long-run average cost curve. If demand causes price to be above the minimum average cost in the short-run, then firms could be operating where price equals long-run marginal cost and they could be making economic profits. When entry occurs in the long-run the price will fall and price will equal long-run marginal cost at the long-run equilibrium output level. Thus the statement is false. See the diagram on the next page. P LAC LMC SAC SMC P* \$/Q Q Q* Q 0 0 Answer to question 10. Consumer surplus in a competitive industry is the area between the price line and the market demand curve, not the individual firm's demand curve.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 5

HW12S_302 - Econ 302 Solution to Problem Set 12 Spring...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online