Project #211253 - economics

Business Tutors

Subject Business
Due By (Pacific Time) 11/10/2017 09:00 pm

Suppose there are two industries: a high-profit industry, Industry H, and a low-profit industry, Industry L. Answer the questions that follow about these two industries.

If the two industries have similar costs, then what must be true about prices in the two industries?

 

 

Therefore, all else equal, value must be higher in:

 

 

If labor and capital are moved from Industry L to Industry H, then:

 

 


Let's change gears. Suppose instead that the prices in the two industries were identical, not the costs, and that profits are higher in Industry H just as before. In this case, what must be true about the costs in the two industries?

 

 

Therefore, all else equal, it must take ____ labor and capital to produce a unit of output in Industry L, compared to Industry H.

 

 

If labor and capital are moved from Industry L to Industry H, then:

 

What role do profits play in a perfectly competitive market?

2 sentences 

 

What role do losses play in a perfectly competitive market?

2 sentences

Match the four market structures below to the proper description of their profits.

Oligopoly                         

Perfect competition

Monopoly

Monopolistic competition

  • Firms don't charge a markup and don't earn economic profit in the long run

  • Profits can exist in the long term, but may be eliminated over time

  • Firms don't earn economic profit in the long term, even though they charge a markup

  • Profits can and probably do exist in the long term

 

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