Question;Complete;Session 4 questions and upload answers as a Word document.;1. Technical Questions 1, 2, 3, and 5 at end;of Ch. 7.;2. Application Questions 1, 3, and 5 at end;of Ch. 7.;Technical Questions;1.;For each of the following graphs, identify the;firm?s profit-maximizing (or loss-minimizing) output. Is each firm making a;profit? If not, should the firm continue to produce in the short run?;2.Consider;a firm in a perfectly competitive industry. The firm has just built a plant;that cost $15,000. Each unit of output requires $5 worth of materials. Each;worker costs $3 per hour.;a. Based;on the information above, fill in the table on the following page.;b. If the;market price is $12.50, how many units of output will the firm produce?;c. At;that price, what is the firm?s profit or loss? Will the firm continue to;produce in the short run? Carefully explain your answer.;d. Graph;your results.;3. The following graph shows;the cost curves for a perfectly competitive firm. Identify the shutdown point;the breakeven point, and the firm?s short-run supply curve.;5Draw graphs showing a perfectly competitive firm and industry in long-run;equilibrium;a. How do you;know that the industry is in longrun equilibrium?;b. Suppose that;there is an increase in demand for this product. Show and explain the short-run;adjustment process for both the firm and the industry.;c. Show and;explain the long-run adjustment process for both the firm and theindustry. What;will happen to the number of firms in the new long-run equilibrium?;Application;Questions;1.;1.;Discuss how the facts in the opening case study;and the subsequent discussion of the potato industry illustrate the lack of;control over prices by individual potato producers in a competitive market, the;response to high prices predicted by the model of perfect competition, and the;attempts by producers in a competitive market to gain control over price. Check;recent business publications to find out how successful the United Potato;Growers of America cooperative has been since the time of this chapter?s case;study.;3 The following facts characterize the;furniture industry in the United States.;a. The;industry has been very fragmented, so that few companies have the;financial backing to make heavy investments in new technology and;equipment.;b. In;1998, only three U.S. furniture manufacturers had annual sales exceeding;$1 billion. These firms accounted for only 20 percent of the market;share, with the remainder split among 1,000 other manufacturers.;c.;Capital spending at one manufacturer, Furniture Brands, was only 2.2;percent of sales compared with 6.6 percent at Ford Motor Company.;Outdated, labor-intensive production techniques were still being used by;many firms.;d.;Furniture manufacturing involves a huge number of options to satisfy;consumer preferences, but this extensive set of choices slows production;and raises costs.;e. Small;competitors can enter the industry because large manufacturers have not;built up any overwhelming advantage in efficiency.;f. The;American Furniture Manufacturers Association has prepared a public;relations campaign to ?encourage consumers to part with more of their;disposable income on furniture.?;g. In;fall 2003, a group of 28 U.S. furniture manufacturers asked the U.S.;government to impose antidumping trade duties on Chinese-made bedroom;furniture, alleging unfair pricing.;h. The;globalization of the furniture industry since the 1980s has resulted from;technological innovations, governmental implementation of economic;development strategies and regulatory regimes that favor global;investment and trade, and the emergence of furniture manufacturers and;retailers with a capacity to develop global production and distribution;networks. The development of global production networks using Chinese;subcontractors has accelerated globalization in recent years. Discuss how;these facts are consistent with the model of perfect competition;5In a perfectly;competitive industry, the market price is $25. A firm is currently;producing 10,000 units of output, its average total cost is $28, its;marginal cost is $20, and its average variable cost is $20. Given these;facts, explain whether the following statements are true or false: a. The firm is;currently producing at the minimum average variable cost.;b. The firm should;produce more output to maximize its profit.;c. Average total;cost will be less than $28 at the level of output that maximizes the;firm?s profit.;Hint: You should assume normal U-shaped cost curves for this problem.
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