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Now assume that the cigarette industry is perfectly competitive and that cigarettes are identical. We also assume that there is no cigarette tax. Using Diagram(s) illustrate what will happen if the cigarette producers earn positive economic profits. Also use a diagram(s) to explain the implication to an individual cigarette producer if the government's anti-smoking campaign process to be successful. In a perfectly competitive market the determination of prices is through supply and demand. The actions of any one firm or consumer will have no impact on the market price for which, if either are to buy and sell in such a market, they have to accept the market price. Firms in a competitive market are unable to dictate the price for which they sell an item for and over a long period of time will be unable to make an economic profit. This being said however, in the short term, if there is a positive economic profit, it is possible for firms to enter the market making a profit until there is no economic profit left. Items in a perfectly competitive market are perfectly elastic whereby the demand curve is horizontal. This is indicative of firms being able to sell as large a quantity of an item as they can at the market price but will be unable to sell at a higher cost. Should the government's anti-smoking campaign be successful, the demand for cigarettes will go down as consumers will consider the cost too expensive. However, it is quite likely that the supply will stay the same resulting in a surplus of cigarettes. This will negatively affect suppliers and retailers profits in the short term. As this would result in an economic loss for firms, the result would likely see some of these firms exiting the market. This would result in a shift allowing the remaining firms to make a profit again. Therefore, the market will again reach equilibrium and the firms will again be able to break even.
Suppose M = $80,000, PR = $30, T = 5, PE = $12, and N = 6,000. Using these, compute and write the direct demand function for Good A. Show your math. Watch the decimals! The coefficient on M is 0.02 and the coefficient on N is .4
Levi Strauss successfully markets Levi jeans on the History channel as a way for older men to stay young forever. What will happen in the jeans market ceteris paribus?
Labor is a resource that is necessary to produce many goods. "If the price of labor falls," says the economist, "the price of goods will soon follow." How does this work?
What is the long-term equilibrium enrollment in the tuition reimbursement sub-program and which sub-program's long-term equilibrium would be more greatly affected?
What are three main factors of production? Who are the main economic decision makers in a Markey system? Can firms and households resolve problems by cooperating with each other?
Suppose you are analyzing market for minivans. What will be the impact on the equilibrium price and quantity of each of the following events on the minivan market?
If you (and everyone else) were certain that the exchange rate between dollars and pounds would not change over the next 180 days, what would you do? What would you have at the end of 180 days?
Discuss why it would cost Pete Sampras or Venus Williams more to leave the pro tennis tour and open a tennis shop than it would cost a coach of a tennis team to do so.
Select any industry with which you are familiar. Make a graph of this market in equilibrium. Provide 2-examples for industry of conditions which would change supply and two that would change demand.
A firm uses two plants (A and B) to produce the product. The plant's marginal cost functions are given by the following equations:
Consider the preferred prices of the authors and publishers of the electronic book, whose marginal cost of production is close to zero? Would the two disagree regarding the price to be charged for book?
How might prohibitions on advertising affect the cigarette industry in the short run, and in the long run using a Prisoner's Dilemma sort of argument.
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