Question: A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium. a. Graphically illustrate and explain the

A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium.
a. Graphically illustrate and explain the short-run adjustments for the market and the firm to a decrease in consumer incomes. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.
b. Next, show on your graph and explain the long-run adjustment to the income change. Be sure to discuss any changes in output levels, prices, profits, and the number of firms.

Step by Step Solution

★★★★★

3.43 Rating (169 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a In the following graph the drop in consumer incomes decreases market demand from D 1 to D 2 This l... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

722-B-E-D-S (683).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Multiple Choice Questions: Use the diagram to answer questions 1 through 4. .:. 1. Currently, it is not possible to produce at a. point A. b. point B. c. point E. d. point G. e. either point E or...

In figure 3-4, the current position of the demand curve is D1, and the price of a portable power bank, which is a normal good, is $3. If there is an increase in consumer incomes, will the demand...

Multiple Choice Questions: 1. Which of the following is not a question that all societies must answer? a. How can scarcity be eliminated? b. What goods and services will be produced? c. Who will get...

(The Long-Run Industry Supply Curve) A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium. a. Graphically illustrate and...

HI PLEASE ANSWER ALL 1. Assume the market for apples is initially in equilibrium. Which of the following will result in a higher equilibrium price of apples? a. An increase in both the demand for and...

Answer the following Free Response Question on a separate sheet of paper. Attach your answer to the quiz when you turn it in. Bestmilk, a typical profit-maximizing dairy firm, is operating in a...

In answering the question, you should emphasize the line of reasoning that generated your results; it is not enough to list the results of your analysis. Include correctly labeled diagrams, if useful...

please help tutors Unit 3 - Firm Behavior and Market Structure - FRQ 2 (Short) Costs of Production 1. Assume that a firm uses capital as a fixed factor of production and labor as a variable factor....

You would like to buy a new car in five years. Presently, the car you want costs $20,000. What will that car cost in five years if the price inflates by 5% each year? a) $25,526 b) $25,000 c) $15,671...

An asset with price S at time 0 pays some cashflows. The cashflows are worth C with probability p, C with probability p2, and C3 with probability 1-P1-P2. These cashflows are paid every n months...

E 2 - 1 0 ( Algo ) Preparing Cost of Goods Manufactured and Income Statement [ 1 0 2 - 6 ] Manufscturing costs for Dwenport Compary during 2 0 1 8 were as follow: Bepirning Finished Beods, Jawury 4...

Computing the change in cash; identifying non-cash transactions Briannas Wedding Shops earned net income of $25,000, which included depreciation of $16,000. Briannas acquired a $116,000 building by...

The height of the demand curve at a given quantity reflects the marginal valuation of the last unit of that good consumed. For a normal good, an increase in income shifts the demand curve to the...

Suppose supply of a good is perfectly elastic at a price of $5. The market demand curve for this good is linear, with zero quantity demanded at a price of $25. Given that the slope of this linear...

The absolute value of the slope of the indifference curve equals the marginal rate of substitution. If two goods were perfect substitutes, what would the indifference curves look like? Explain.

Consider a firm with an EBITDA of $ 1 , 1 0 0 , 0 0 0 and an EBIT of $ 1 , 0 0 0 , 0 0 0 . The firm finances its assets with $ 4 , 7 2 0 , 0 0 0 debt ( costing 7 . 7 percent, all of which is tax...

Suppose you are holding a long position in a French franc futures contract that matures in 76 days. The agreed-upon price is $0.15 for FF 250, 000. At the close of trading today, the futures price...

A stock has had the following year-end prices and dividends Year Price Dividend 1$43.37 3 5 48.35 $.60 57.27 45.35 52.27 61.35 63 80 85 93 What are the arithmetic and geometric returns for the stock?...