Cost curves in perfect competition industry

Assignment Help Microeconomics
Reference no: EM1374429

Catfish farming in Louisiana is a perfect competition market. Hence, customers of catfish are getting their catfish at the minimum cost per unit of manufacturing catfish, and they are very happy. However, it turns out that farming catfish in ponds is producing substantial pollution run off of foul water into nearby creeks and rivers, as catfish farmers periodically empty their ponds and refresh them. The pollution is causing a substantial decrease in the crayfish catch, increasing their price, and making consumers who favor crayfish very unhappy. Catfish farming can be reduced to the point where the creeks and rivers can absorb the run off from the ponds without hurting the crayfish. This could be accomplished by charging catfish farmers a pollution fee for every gallon of pond water they empty into nearby creeks and rivers. However, there are more catfish consumers than there are crayfish consumers, and there are not enough votes to enact a pollution fee. But restaurant owners in New Orleans carry a lot of weight and they earn an enormous profit from tourists coming to eat crayfish in New Orleans. They finally get the pollution fee enacted.

Describe the adjustment that will take place in the catfish farming industry in Louisiana that will result from the implementation of the pollution fee. Use diagrams with "U" shaped cost curves.

Suggestion: The number of firms in catfish farming in Louisiana will decrease, and the price of catfish per pound will increase when a new equilibrium is finally reached.

 

Reference no: EM1374429

Questions Cloud

Money creation and monetary policy : You have been employed to manage a small manufacturing facility which has cost and production data given in the table listed below.
Determine the firm output and price : Under patent protection, a company has a monopoly in the production of a high tech component. Market demand is estimated to be: P = 100 - 0.2Q.
Determine the eigen values and corresponding eigen vectors : determine the stability of the critical point for both the linearized and nonlinear system using the linearization process (that is, explicitly writed own the linearized system at (1,1) and use the eigen values of the corresponding coefficient mat..
Equilibrium price and quantity after the shift of the supply : The demand and supply curves for T-shirts in LA, Ca, are given through the following equations, Determine the equilibrium price and quantity after the shift of the demand curve.
Cost curves in perfect competition industry : Catfish farming in Louisiana is a perfect competition market. Hence, customers of catfish are getting their catfish at the minimum cost per unit of manufacturing catfish, and they are very happy.
Use a diagram to show demand curve and marginal revenue : Northern Granite Corporation, a corporation in New England, installs granite counter tops in houses. When it 1st entered the business, price per foot for installing a granite counter top was $180 per square foot,
Find the price and quantity for maximum sales revenue : The market demand function of a company is given by 8P + Q - 64 = 0, and the company's average cost function takes the form AC = 8/Q + 6 - 0.4Q + 0.08Q2.
Explain gdp changes by supply and demand : The aggregate demand curve slopes decrease, because when the price level is reduce, people can afford to purchase more, and aggregate demand increase.
Economic structure and possible future actions of opec : You have been contracted by an economic consulting company to estimate the economic structure and possible future actions of OPEC, Organization of Petroleum Exporting nations.

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Effect of price freeze on equilibrium parameters

What is the equilibrium? If the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described above?

  Government intervention in market

Mention five ways you are affected on a daily basis by government intervention in the market. For what reason might government be involved? Is that reason justified?

  Highly inelastic price elasticity of supply

Name three goods or services with highly elastic price elasticity of supply. Name three goods or services with highly inelastic price elasticity of supply.

  Production possibilities curve-free markets

Pick a social problem where free markets aren't allowed to function and explain how free market features could be introduced to aid alleviate the problem.

  Explanation to price discrimination

Which of the following is NOT a condition for price discrimination? Different groups of consumers should be charged differing prices for the same product. The firm's demand curve should be downward sloping.

  Difference-total variable costs-average variable cost

Determine the difference between Total Variable Costs (TVC), Average Variable Costs (AVC) and Marginal Costs (MC).

  Business comparisons-short and long-term costs

Short and Long-term costs business comparisons. Select directly comparison business concepts and generally discuss the FC, VC, break-even quantities, economies of scale and diseconomies of scale for each.

  Decrease in price of access

The steady increase in demand for home computers has resulted in the massive increase in demand for web access, yet, the price of access has been steadily declining.

  Pricing-output decisions in short run

If a representative firm with total cost given by TC = 20 + 20q + 5q2 operates in a competitive industry where the short-run market demand and supply curves are given by QD = 1,400 - 40P and QS = -400 + 20P, the number of firms operating in the sh..

  Question about marginal benefit curves

When negative or positive externalities exist economists say that market has unsuccessful to make the right amount of the good at the right price. What do economists mean through this?

  Define the term opportunity cost

Define the term "opportunity cost." Now that you have a definition of opportunity cost weigh the positives and negatives of taking a leave of absence from work and moving out of town to attend college full time, or maintaining your job while atten..

  Increase-decrease in money supply

Assume the Fed decides to buy $1 billion in Treasury bonds from the public. Suppose that the reserve requirement is 10%. What takes place to the interest rate and money supply?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd