On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses strai
1 answer:
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Answer:
A.
Explanation:
An improve in technology will allow firms to produce in an effective way therefore, with the same resources, firms will produce more units. This will cause an increase in total supply: at the same price, firms will offer more units. In this case, at prices $1, $2, $3, $4 and $5 the new quantities will be 6,8,10,12. In the demand and supply graph, this looks as shift to the right of the supply curve (figure attached).
It is not option B because the problem says increase in quantities "at these prices". It is not option C because an increase in taxes will increase costs of production, thus firms will decrease units of production. It is not option D because changes in income will affect demand.
Answer:
Explanation:
A.) Answer to question A is attached.
B.) The price of the pie is $10 according to the question. Please note that in a competitive market, a firm produces that level of output at which price equals MC. I.e P = MC. Where there is no such output, then it will produce up to the level in which P>MC.
Therefore, price(P) is equal to MC, P = MC up to the production of 5 pies.
So, producers in the market = 300 ÷ 5
= 60.
Profit = ( 5 × 10 ) - ( 5 × 7.8 )
= 50 - 39
= $11
Therefore, at a price of $10, 300 pies are sold in the market. Each producers makes 5 pies, so there are 60 producers in the market, each making a profit of $11.
C.) In a competitive market, and in the long run, price = minimum ATC.
Here, the minimum ATC is $7, but the price is $10.
The above means that the market is not in the long run equilibrium because price (P) is not equal to the minimum ATC. Thus in the long run, more firms will enter the market until the price equals ATC.
D.) Producers operating = 600 ÷ 2
= 300
It therefore means that in the long run, each producer earns a profit of $0. The market price is $7, while at this price, 600 pies are sold in the market, and each producer makes 2 pies , hence there are 300 producers in operation.
