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Now assume that the cigarette industry is perfectly competitive and that cigarettes are identical. We also assume that there is no cigarette tax. Using Diagram(s) illustrate what will happen if the cigarette producers earn positive economic profits. Also use a diagram(s) to explain the implication to an individual cigarette producer if the government's anti-smoking campaign process to be successful. In a perfectly competitive market the determination of prices is through supply and demand. The actions of any one firm or consumer will have no impact on the market price for which, if either are to buy and sell in such a market, they have to accept the market price. Firms in a competitive market are unable to dictate the price for which they sell an item for and over a long period of time will be unable to make an economic profit. This being said however, in the short term, if there is a positive economic profit, it is possible for firms to enter the market making a profit until there is no economic profit left. Items in a perfectly competitive market are perfectly elastic whereby the demand curve is horizontal. This is indicative of firms being able to sell as large a quantity of an item as they can at the market price but will be unable to sell at a higher cost. Should the government's anti-smoking campaign be successful, the demand for cigarettes will go down as consumers will consider the cost too expensive. However, it is quite likely that the supply will stay the same resulting in a surplus of cigarettes. This will negatively affect suppliers and retailers profits in the short term. As this would result in an economic loss for firms, the result would likely see some of these firms exiting the market. This would result in a shift allowing the remaining firms to make a profit again. Therefore, the market will again reach equilibrium and the firms will again be able to break even.
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.
Determine the present worth of 5 annual deposits of $1,200 at the end of years 1 through 5, followed by 4 equal annual withdrawals of $700 at the end of years 4 through 7. Note that both years 4 and 7 will have a depsoit and a withdrawal. Interest..
suppose demand and supply are given by qd 50 - p and qs frac12 p - 10.a. what are the equilibrium quantity and price
Which, if any, of the following changes is likely to cause reported GDP (real and nominal) to increase when, in fact, total economic production is little changed?
utility if a function of income (I), given by: \(U = 101\) as long as I is less than or equal to 300. If I is greater than 300, your utility is a constant equal to 3,000. Suppose you have a choice between having an income of 300 with ce..
The miracle Manufacturing company Short run Average cost Function In 1997 Is AV=3+4Q , Whwer AC is The firms Average cost ($/pound)And Q Is its output rate. A) Obtain an equation For the firms Short-run Total cost function.
use the following data for a firms output at various levels of employment l to calculate a its marginal physical
What do economists mean when they say that monetary policy can echibit cyclical asymmetry How does the idea of a liquidity trap relate to cyclical asymmetry Why is this possibility of a liquidity trap significant to policymakers
The U.S. Department of Education reported the following number of bachelor's degrees awarded now what is the annual arithmetic mean number of degrees awarded?
Explain how this transaction would be recorded in your firm's financial statements. Additionally, your hospital has experienced negative levels of net income for the last five years. The total amount of accumulated deficits is $5 million
Consider the choices of two groups of women ages 30 to 50. All the women in one group have a college education. All the women in the other group have less than a high school education
Calculate the profit maximizing price and quantity of subscriptions for the U.K. and indicate each on the appropriate graph. Do the same for the U.S.
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