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.

Which market type is most beneficial to consumers?

A) Monopolistically competitive market

B) Monopoly

C) Oligopoly

D) Perfectly competitive market

Suppose that each firm in a competitive industry has the following costs:

Total cost: $\quad T C=50+1 / 2 q^2$

Marginal cost: $\quad M C=q$

where $q$ is an individual firm's quantity produced. The market demand curve for this product is

Demand: $\quad Q^D=120-P$

where $P$ is the price and $Q$ is the total quantity of the good. Currently, there are 9 firms in the market.

In this equilibrium, how much does each firm produce? Calculate each firm's profit or loss. Is there incentive for firms to enter or exit?

Suppose that each firm in a competitive industry has the following costs:

Total cost: $\quad T C=50+1 / 2 q^2$

Marginal cost: $M C=q$

where $q$ is an individual firm's quantity produced. The market demand curve for this product is

Demand: $\quad Q^D=120-P$

where $P$ is the price and $Q$ is the total quantity of the good. Currently, there are 9 firms in the market.

a. What is each firm's fixed cost? What is its variable cost? Give the equation for average total cost.

b. Graph the average-total-cost curve and the marginal-cost curve for q from $5$ to $15$ . At what quantity is the average-total-cost curve at its minimum? What is marginal cost and average total cost at that quantity?

c. Give the equation for each firm's supply curve.

d. Give the equation for the market supply curve for the short run in which the number of firms is fixed.

e. What is the equilibrium price and quantity for this market in the short run?

f. In this equilibrium, how much does each firm produce? Calculate each firm's profit or loss. Do firms have an incentive to enter or exit?

g. In the long run with free entry and exit, what is the equilibrium price and quantity in this market?

h. In this long-run equilibrium, how much does each firm produce? How many firms are in the market?

Analyze the following situation for firms in competitive markets:

Suppose that $M C=4 q$, where $M C$ is marginal cost. The perfectly competitive firm maximizes profits by producing 10 units of output. At what price does it sell these units?

Analyze the following situation for firms in competitive markets:

Suppose that $T C=100+15 q$, where $T C$ is total cost and $q$ is the quantity produced. What is the minimum price necessary for this firm to produce any output in the short run?

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her$50,000 per year job as an accountant.

What is your aunt’s opportunity cost of running a hardware store for a year? If your aunt thought she could sell $510,000 worth of merchandise in a year, should she open the store? Explain.

Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her$50,000 per year job as an accountant.

Define opportunity cost.

“Ninety percent of new products fail within two years—so you shouldn’t be so eager to innovate.” Do you agree? Explain why or why not.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{array}{lc} & \text{Quantity of Fish} \\ \text{Hours} & \text{ (in pounds) } \\ \hline 0 \text{ hours } & 0 \text{ lb } \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array}$$

a. What is the marginal product of each hour spent fishing?

b. Use these data to graph the fisherman's production function. Explain its shape.

c. The fisherman has a fixed cost of $\$ 10$ (his pole). The opportunity cost of his time is $\$ 5$ per hour. Graph the fisherman's total-cost curve. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

$$\begin{aligned} &\begin{array}{lc} &\text { Quantity of Fish }\\ \text { Hours } & \text { (in pounds) } \\ \hline 0 \text { hours } & 0 \mathrm{lb} . \\ 1 & 10 \\ 2 & 18 \\ 3 & 24 \\ 4 & 28 \\ 5 & 30 \end{array} \end{aligned}$$

Use these data to graph the fisherman's production function. Explain its shape.

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

Use these data to graph the fisherman’s production function. Explain its shape.

Relate opportunity costs to why profits encourage entry into purely competitive industries and how losses encourage exit from purely competitive industries

A commercial fisherman notices the following relationship between hours spent fishing and the quantity of fish caught:

What is the marginal product of each hour spent fishing?