Econ1-Fall2010-PS8 - Econ 1 PS #8: The Invisible Hand,...

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

View Full Document Right Arrow Icon
Econ 1 PS #8: The Invisible Hand, International Trade & Monopoly Fall 2010 1. a. Explain the difference between Economic and Accounting profit. b. Explain why a firm earns an Economic profit of zero in the long-run, competitive equilibrium. c. If a firm is producing a positive quantity in a long-run, competitive equilibrium, what can we say about Normal profit? 2. Suppose the cell phone industry is perfectly competitive and in a long-run equilibrium. Assume that the demand for cell phones suddenly decreases. a. Use a graph to illustrate what will happen to the equilibrium price and quantity of cell phones in the short run. b. In the short run, what will happen to profits for firms in this market? c. In the long-run, will firms enter or exit this market? d. On your graph for part a show the effect of your answer to part c on the equilibrium price and quantity of cell phones under the assumption that this is a constant cost industry. (For extra practice, you can re-work part (d) for either an increasing or decreasing cost industry.) 3. Suppose there are only two farms on the small island of Antillia. Both farms produce only corn and tomatoes. The first farm is run by Jubilee Cobb, and her farm’s annual PPC is given by
Background image of page 1

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

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/15/2011 for the course ECON 1 taught by Professor Aben during the Fall '07 term at City College of San Francisco.

Page1 / 3

Econ1-Fall2010-PS8 - Econ 1 PS #8: The Invisible Hand,...

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

View Full Document Right Arrow Icon
Ask a homework question - tutors are online