Short-run and long run profits questions, Microeconomics

Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to:

a. Your firm's costs of production?  Explain.


According to the problem, the home remodeling industry is an increasing - cost industry, hence the industry will have a rising supply curve and in the long run the firm's cost of production is going to increase. Thus its Marginal cost (MC) curve and Average cost (AC) curve both would be rising in the long run.

 b. The price you can charge for your remodeling services.  Why?


The firm will have to charge higher price for remodeling in order to maintain profit in the long run.

 c. Profits in home remodeling? Why?


In order to enjoy profits in the long run, the firm has to cover its cost of production. Now as cost of production is very much likely to increase in the long run, hence the firm has to adjust its price in the long run too.

Posted Date: 7/10/2012 8:22:42 AM | Location : United States

Related Discussions:- Short-run and long run profits questions, Assignment Help, Ask Question on Short-run and long run profits questions, Get Answer, Expert's Help, Short-run and long run profits questions Discussions

Write discussion on Short-run and long run profits questions
Your posts are moderated
Related Questions
Problem: a) What factors would you consider when analysing the digital economy relative to e business? b) "The growing use of the internet by consumers and businesses has re

Axioms: It is possible to construct a utility index which can be used to predict choice in uncertain situations if the consumer conforms to the following five axioms:  • A

How many half-lives are required for the concentration of reactant to decrease to 1.56% of its original value?

You are examining the effects of a specific tax of 10 cents imposed on the sales of a product that we shall call XYZ. To carry out your analysis, assume that the market is a perfec

a project report on marshalls marginal utility analysis

In theory, we know that a monopolist basis its price directly off of the demand curve, but in practice a monopolist cannot ''see'' the demand curve. Explain how a monopolist might

#. The following information applies to the market for a particular items in the absence of a unit excise tax: Price($ per unit) Quantity Supplied Quantity Demanded 4 50

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT: The main function of the IBRD is of long-term capital assistance to its member-countries for their reconstruction and de

in economics what is cobb douglas theory?