Suppose that the market for eggs in Oswego Coutny is perfectly competitive. Also

Question

Suppose that the market for eggs in Oswego Coutny is perfectly competitive. Also, a just-released study indicates that the cholesterol absorbed by consuming eggs is not as detrimental to one’s health as previously thought. As a result, a permanent increase in the market's demand for eggs occurs. Because of this change _____.

a. the short-run profits of a typical egg farmer will rise; the typical egg farmer will decrease the egg production in the short run; and the long run market output will be higher.

b. the short-run profits of a typical egg farmer will rise; the typical egg farmer will increase the egg production in the short run; and the long-run market output will be higher

c. the short-run profits of a typical egg farmer will fall; the typical egg farmer will decrease the egg production in the short run; and the long-run market output will be higher

d. the short-run profits of a typical egg farmer will fall; the typical egg farmer will increase the egg production in the short run; and the long-run market output will be higher

The entry of new firms into a competitive market will _____.

increase the market supply and decrease the market price

decrease the market supply and increase the market price

decrease the market supply and decrease the market price

d. increase the market supply and increase the market price

Consider the following information about firm "X".

Assume that the equilibrium price in a perfectly competitive market is $20. Given the information in the table above, what is the firm's profit-maximizing level of output?

3

6

5

4

Graph 1 depicts the cost structure of a perfectly competitive firm. If this firm is faced with a market price of $8, it would prefer to produce _____.

46 units

24 units of output

18 units of output

34 units of output

30 units of output

a.

increase the market supply and decrease the market price

b.

decrease the market supply and increase the market price

c.

decrease the market supply and decrease the market price

d.

d. increase the market supply and increase the market price

Consider the following information about firm "X".

Assume that the equilibrium price in a perfectly competitive market is $20. Given the information in the table above, what is the firm's profit-maximizing level of output?

a.

3

b.

6

c.

5

d.

4

Graph 1 depicts the cost structure of a perfectly competitive firm. If this firm is faced with a market price of $8, it would prefer to produce _____.

a.

46 units

b.

24 units of output

c.

18 units of output

d.

34 units of output

e.

30 units of output

Explanation / Answer

1> b. the short-run profits of a typical egg farmer will rise; the typical egg farmer will increase the egg production in the short run; and the long-run market output will be higher

Reason

Since the demand curve will shift to the right, the farmers will make some profit and the equilibrium output will be higher. Also, the long run output will be higher due to the higher level of demand.

2> a increase the market supply and decrease the market price

Entry of new firms will increase supply naturally, as there is more supply, the price should fall.

3> figure is missing

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