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    ECON5541 Assign 1 PDF

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    The document provides information about a perfectly competitive market for paper production including: 1) Market demand and cost schedules for 1,000 paper producing firms. 2) Questions about short-run and long-run market equilibrium price, output, and firm profits given changes in demand. 3) A request to explain short-run and long-run adjustments in the wheat and nappy service markets given changes to world population and Australian birth rate.

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    ECON5541 Assign 1 PDF

    Uploaded by

    - wurile
    111 views2 pages
    The document provides information about a perfectly competitive market for paper production including: 1) Market demand and cost schedules for 1,000 paper producing firms. 2) Questions about short-run and long-run market equilibrium price, output, and firm profits given changes in demand. 3) A request to explain short-run and long-run adjustments in the wheat and nappy service markets given changes to world population and Australian birth rate.

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    The document provides information about a perfectly competitive market for paper production including: 1) Market demand and cost schedules for 1,000 paper producing firms. 2) Questions about short-run and long-run market equilibrium price, output, and firm profits given changes in demand. 3) A request to explain short-run and long-run adjustments in the wheat and nappy service markets given changes to world population and Australian birth rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    111 views2 pages

    ECON5541 Assign 1 PDF

    Uploaded by

    - wurile
    The document provides information about a perfectly competitive market for paper production including: 1) Market demand and cost schedules for 1,000 paper producing firms. 2) Questions about short-run and long-run market equilibrium price, output, and firm profits given changes in demand. 3) A request to explain short-run and long-run adjustments in the wheat and nappy service markets given changes to world population and Australian birth rate.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    ECON5541 Online Individual Assignment 1

    (Due on March 28 Saturday, by 12 noon)

    100 points, equivalent to 15% of the unit’s assessments


    Please typewrite your answers. Convert your assignment into a pdf file and upload them in
    the Assessments and Feedback => Assignment 1 folder => Assignment1 submission link on
    LMS. You can submit only once, so go over your work thoroughly before you pdf it and
    upload it. Save a copy of your assignment as a backup.

    1. The market for paper is perfectly competitive and there are 1,000 firms that produce
    paper. The first table sets out the market demand schedule for paper. Each producer of paper
    has the costs in the second table when it uses its least-cost plant.

    Output Marginal cost Average Average


    Price Quantity demanded
    (boxes (dollars per variable cost total cost
    (dollars per box) (thousands of boxes per
    per additional box) (dollars per box)
    week)
    week)
    3.65 500
    200 6.40 7.80 12.80
    5.20 450
    250 7.00 7.00 11.00
    6.80 400
    300 7.65 7.10 10.43
    8.40 350
    350 8.40 7.20 10.06
    10.00 300
    400 10.00 7.50 10.00
    11.60 250
    450 12.40 8.00 10.22
    13.20 200
    500 20.70 9.00 11.00

    In answering parts (a)-(e), please explain how you get the solution concisely.
    a. What is the market price of paper? What is the market’s output? What is the output
    produced by each firm? (10 points)
    b. What is the economic profit made or economic loss incurred by each firm? (10 points)
    c. As more and more computer users read documents online rather than print them, the
    market demand for paper decreases and in the short run the demand schedule becomes
    the schedule shown in the table. If each firm producing paper has the costs set out as
    above, what is the market price and the economic profit or loss of each firm in the
    short run? (10 points)

    Price Quantity demanded


    (dollars per box) (thousands of boxes per
    week)
    2.95 500
    4.13 450
    5.30 400
    6.48 350
    7.65 300
    8.83 250
    10.00 200
    11.18 150
    d. In the long run, do firms have an incentive to enter or exit the paper market? (10
    points)
    e. If firms do enter or exit the market, explain how the economic profit or loss of the
    remaining paper producers will change. What is the long-run equilibrium market price
    and the quantity of paper produced? What is the number of firms in the market? (10
    points)

    2. Based on the perfect competition model as depicted in the following diagrams, explain
    the short-run and long-run economic adjustments occurring in the following two markets.
    Please distinguish the market diagram and individual firm’s diagram. Initial market
    demand and supply curves and firm’s marginal revenue curve are denoted as 𝐷 , 𝑆 and
    𝑀𝑅 respectively.

    (a) Explain how the growing world population is influencing the world market for wheat
    and a representative individual wheat farmer. (25 points)

    (b) Explain how the nappy service market has been affected by the decrease in the
    Australian birth rate and the development of disposable nappies.(Assume nappies
    market is perfectly competitive.) (25 points)

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