In a perfectly competitive market, each firm maximizes its profit by
choosing only the quantity to produce. Regardless of whether the firm
makes an economic profit or incurs an economic loss, the short-run
equilibrium is efficient. Is the statement true?
In a perfectly competitive market in long-run equilibrium, can consumer surplus
be increased? Can producer surplus be increased? Can a consumer become better
off by making a substitution away from this market?
Once at the competitive equilibrium quantity,
Do firms have an incentive to enter or exit the paper market?
In the long run, some firms exit the industry because they are incurring an
If firms do enter or exit the market, explain how the economic profit or loss of the
remaining paper p
In what type of market do these gas stations operate? What determines the price
of gasoline and the marginal revenue from gasoline?
These stations operate in a perfectly competitive market. The
equilibrium price is determined at the equilibrium between th
Explain and illustrate graphically how the growing world population
is influencing the world market for wheat and a representative
individual wheat farmer.
The increase in the world population increases the market
demand for wheat. The price of wheat rise
Big Drops in Prices for Crops Make It Tough Down on the Farm
Grain prices have fallen roughly 50 percent from earlier this year. With better-thanexpected crop yields, world grain production this year will rise nearly 5 percent from
2007 to a record high.
In perfect competition, when market demand increases, explain how
the price of the good and the output and profit of each firm
changes in the short run.
When market demand increases, the market price of the
good rises, and the market quantity increases. B
Describe what happens to output, price, and economic profit in the
short run and in the long run in a competitive market following:
An increase in demand.
An increase in demand increases the market quantity, and the
market price rises above ATC for each f
State the conditions that must be met for resources to be allocated efficiently.
Resource use is efficient when the economy produces the goods and
services that people value most highly. This situation requires that consumers are
on their demand curves, t
Explain why an airline might incur an economic loss in the short run as fuel
prices rise. The increase in fuel prices raises the airlines average total cost, ATC. If
the ATC increases enough, the airline will find that at its profit-maximizing quantity,