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Chapter 23: Q. 12 (page 533)

In several perfectly competitive markets for minerals used as inputs in digital devices, persistent increases in demand eventually have generated long-run increases in the market prices of these devices. Describe in words the types of adjustments that must have occurred in these markets to have brought about this outcome, and evaluate whether such digital-device industries are increasing-, constant-, or decreasing-cost industries.

Short Answer

Expert verified

It's within the long term, the variable costs have dipped with consistent or dipped costs,leading to economic profits

Step by step solution

01

Introduction

A competitive market is one where there are numerous producers that compete witheach other in hopesto supply goods and services we, as consumers, wantand want. In other words, not one single producer can dictate the market. One producer and one consumer can't decidethe worth of products or decidethe number that may be produced.

02

Given Information

Minerals used as inputs in digital devices, persistent increases in demand eventually have generated long-run increases within the market prices of those devices.

03

Explanation

The industry has seen as an constant cost industry.
In this, the long term inputs have dipped in prices nor stayed constant. Since, it's within the long term, the variable costs have dipped with consistent or dipped costs, leading to economic profits.

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Most popular questions from this chapter

Consider a market for online movie rentals. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. Consider each of the following events, and discuss the effects they will have on the market clearing price and on the demand curve faced by the individual online rental firm.

a. Peoples tastes change in favor of going to see more movies at cinemas with their friends and Family members.

b. More online movie-rental firms enter the market.

c. There is a significant increase in the price to consumers of Purchasing movies online.

Explain how the equilibrium price is determined in a perfectly competitive market

Yesterday, a perfectly competitive producer of construction bricks manufactured and sold10,000 bricks per week at a market price that was just equal to the minimum average variable cost of producing each brick. Today, all the firm's costs are the same. but the market price of bricks has declined.

a. Assuming that this firm has positive fixed costs, did the firm earn economic profits, economic losses, or zero economic profits yesterday?

b. To maximize economic profits today, how many bricks should this firm produce today?

Suppose that a firm in a perfectly competitive industry finds that at its current output rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. Furthermore, Marginal revenue (MR)is that the increase in revenue that results from the saleof 1 additional unit of output. While marginal revenue can remain constant overa specific level of output, it follows from the law of diminishing returnsand can eventuallyblock because the output level increases. Intheory, perfectly competitive firms continue producing output until marginal revenue equalsincremental cost.
Is the firm maximizing its economic profits? Why or why not?

The minimum feasible long-run average cost for firms in a perfectly competitive industry is $40per unit. If every firm in the industry currently is producing an output consistent with a long-run equilibrium, what is the marginal cost incurred by each firm? What is the market price?
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