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3b. Explain the difference between a firm in a purely competitive industry shutting downand a firm exitinga purely competitive industry because they are incurring negative profits.4.Suppose John Doe rents his studio in Minnesota for his dancing school. He has to pay $2000(the market rate) a month to rent his studio. Now suppose the state of Minnesota, as a gestureof their appreciation for John Doe’s contribution to society, decides to purchase the studioand give it back to John. He no longer has to pay rent for using the studio. Additionallyassume nothing else changes and John continues to operate his dancing school.a. Has his accounting profit in each month changed after the gift? If so, what is the change?b. Has his economic profit changed after the gift? If so, what is the change?5. What can you expect from a purely competitive firm in the long-run? What will price be?
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Economics,consultant,purely competitive market,purely competitive firm,purely competitive industry