Complete the following:
Chapter 7, Technical Questions 3 and 5
Chapter 7, Application Question 5
Chapter 8, Technical Questions 3 and 7
Follow these instructions for completing and submitting your assignment:
Place all answers, both numerical and written, in a single excel spreadsheet.
Place each problem into a separate tab or sheet in an Excel file.
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If the question incorporates graphs, you must replicate the graph on your spreadsheet file.
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Technical Question
5. Draw graphs showing a perfectly competitive firm and industry in long-run equilibrium.
a. How do you know that the industry is in long run, 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 the industry. What will happen to the number of firms in the new long-run equilibrium?
Application Question
5. In a perfectly competitive industry, the marketprice is $25. A firm is currently producing 10,000units of output, its average total cost is $28, itsmarginal cost is $20, and its average variable costis $20. Given these facts, explain whether the followingstatements are true or false:
a. The firm is currently producing at the minimumaverage variable cost.
b. The firm should produce more output to maximizeits profit.
c. Average total cost will be less than $28 at thelevel of output that maximizes the firm's
profit.
Hint: You should assume normal U-shaped costcurves for this problem