Assume that the gold-mining industry is competitive.

a. Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine.

b. Suppose that an increase in jewelry demand induces a surge in the demand for gold. Using your diagrams, show what happens in the short run to the gold market and to each existing gold mine.

c. If the demand for gold remains high, what would happen to the price over time? Specifically, would the new long-run equilibrium price be above, below, or equal to the short-run equilibrium price in part (b)? Is it possible for the new long-run equilibrium price to be above the original long-run equilibrium price? Explain.

Suppose there are $1,000$ hot pretzel stands operating in New York City. Each stand has the usual U-shaped average total cost curve. The market demand curve for pretzels slopes downward, and the market for pretzels is in long-run competitive equilibrium.

a. draw the current equilibrium using graphs for the entire market and for an individual pretzel stand

Because bagels and cream cheese are often eaten together, they are complements .

Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern: a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer.

Assume that the gold-mining industry is competitive.

Illustrate a long-run equilibrium using diagrams for the gold market and for a representative gold mine.

Because bagels and cream cheese are often eaten together, they are complements.

a. We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern-a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer.

b. Suppose instead that the equilibrium price of cream cheese has risen but the equilibrium quantity of bagels has fallen. What could be responsible for this pattern-a rise in the price of flour or a rise in the price of milk? Illustrate and explain your answer.

"Because bagels and cream cheese are often eaten together, they are complements.

We observe that both the equilibrium price of cream cheese and the equilibrium quantity of bagels have risen. What could be responsible for this pattern—a fall in the price of flour or a fall in the price of milk? Illustrate and explain your answer."

Suppose there are 1,000 hot pretzel stands operating in New York City. Each stand has the usual U-shaped average-total-cost curve. The market demand curve for pretzels slopes downward, and the market for pretzels is in long-run competitive equilibrium.

Draw the current equilibrium, using graphs for the entire market and for an individual pretzel stand.

Suppose the book-printing industry is competitive and begins in a long-run equilibrium. Hi-Tech Printing Company invents a new process that sharply reduces the cost of printing books. What happens to Hi-Tech's profits and to the price of books in the short run when Hi-Tech's patent prevents other firms from using the new technology ?

Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises. a. Using diagrams, show what happens to the cost curves of an individual boat-making firm and to the market supply curve. b. What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?

How are prices neutral ?

“High prices traditionally cause expansion in an industry, eventually bringing an end to high prices and manufacturers’ prosperity.” Explain, using appropriate diagrams

Suppose there are 1,000 hot pretzel stands operating in New York City. Each stand has the usual U-shaped average-total-cost curve. The market demand curve for pretzels slopes downward, and the market for pretzels is in long-run competitive equilibrium.

a. Draw the current equilibrium, using graphs for the entire market and for an individual pretzel stand.

b. Now the city decides to restrict the number of pretzel-stand licenses, reducing the number of stands to only 800. What effect will this action have on the market and on an individual stand that is still operating? Use graphs to illustrate your answer.

c. Suppose that the city decides to charge a license fee for the 800 licenses. How will this affect the number of pretzels sold by an individual stand, and the stand’s profit? The city wants to raise as much revenue as possible and also wants to ensure that 800 pretzel stands remain in the city. By how much should the city increase the license fee? Show the answer on your graph.

Suppose that the U.S. textile industry is competitive and there is no international trade in textiles. In long-run equilibrium, the price per unit of cloth is $30.

Describe the equilibrium using graphs for the entire market and for an individual producer. Now suppose that textile producers in other countries are willing to sell large quantities of cloth in the United States for only$25 per unit.

How do prices help us make decisions ?