Module 5 Highly Competitive Industry Structure Weekly Evaluation Module 5 Econ 1103 Question 1 Hypothetical Firm's Short-run Cost Curves Q Of Ban-E's ___ 70 MC 55 60 55 50 45 40 35 AVG 3o 25 20 15 ' 1O 5 0 ATC PricelBarrel ($} 0 2 4 6 8 1012141618202224262330 The graph above shows shortrun cost curves for a rm in a highly competitive market. E I 'I'I' "I I'iiiili Answer all the questions below based on your understanding and use of the graph. 1.1 On the Firm's SR Cost Curves (above) Draw and Label the WQ)MMarginal_ mm (MR) based on the information you have from the market price. Based on P=$30 the firm is producing Barrels of Output. 1.2 Write the profit maximizing loss minimizing rule of output. 1.3 At the current market price the rm is covering approximately $ or AFC and 5 of its AVC. 0n the Y axis Label the AW: and AFC associated with the output level. 1.4. Calculate the nuns short-run prot or loss in the space below. Prot (loss) $ 1.5. On the graph indicate the geometric conguration of the prot (loss). Shade in the area and clearly label it as a profit or loss. 1.6. Write the notation for Long Run Equilibrium. 1.7. What will be the price in Long run Equjllhc'tuml $ 1.3. Explain (below) why the short-run costs curves are U-shaped. Question 2. 2.1 Explain (below) what will happen in the Long Run in the Market and what impact uiiLit have on the Firm based on the economic condition you calculated in Question 1. In your explanation be sure that you are explaining the long run adjustment for the market and the rm. 2.2 Briey explain why these adjustments occur in the market. Question 3. These are very similar Short Run and Long Run questions just using a table format. Hypothetical Firrn Short Run Costs MCI TFC TVC 90-00 190.00 10.00 19.00 17.90 10 100 9.00 11 100 109.0 209.00 19.00 19.00 0 9.09 991 12 100 130.4 230.40 10.8 19.20 21.40 0 3.33 7 160-0 260.00 12.3 20.00 29.60 14 100 198-2 298.20 14.1 21. 30 0 7.14 0 15 100 240.95 349.50 16.6 23. 30 5.57 3 m 100 9000-0 1000.0 50.00 202.0 0 5.00 0 WW Answer all the questions below based on your understanding and use of the table. The rm is in a highly competitive market. 3.1 complete the MR Column on the table based on the information o_fthe Market Price. 3.2 Shade in the row that represents the profit maximizing output and write the notation beside the row for prot maximizing output level. 3.3. Calculate the fin'n's shortrun prot or loss in the Space below based on the table. Prot (loss) :3 {Show your calculation). 3.4 At current market price the rm is covering approximately 35 of its AFC, and $ of its AVC. 3.5 What will be the price in Lung run Equilibrium? $ 3.5 Briey explain (below) what will happen in the Long Run in the Market and what impact milL it have on the Firm based on the economic condition you calculated in Question luthe Table information) (gplain why.) Question 4. Three Brief Essays a. Briefly describe/define a firm's supply curve and the market supply curve for a highly competitive firm. b. Write the notation for long run equilibrium and briefly explain why this is an efficient level of output. c. Will a firm stay in business when it is making zero economic profit? Explain