Short-run and long run profits questions, Microeconomics

Assignment Help:

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.

Answer:

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?

Answer:

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?

Answer:

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.


Related Discussions:- Short-run and long run profits questions

Mathematical presentation of utility maximisation, Mathematical Presentatio...

Mathematical Presentation of Utility maximisation: Consumer's objective is to maximise her utility by solving UMP. To solve UMP, we set the Lagrange function of the correspond

What is black economy, Defining black economy, If you pay your cleaner or ...

Defining black economy, If you pay your cleaner or builder in cash or for some reason neglect to tell the taxman which you were paid for a service rendered, you participate in the

Risk Curves, Does the curve represent if the risk is NOT taken and the line...

Does the curve represent if the risk is NOT taken and the line connecting two points on the curve represents if the risk IS taken?

Socialist economy, Socialist Economy: The material means of production are ...

Socialist Economy: The material means of production are owned by the whole community represented by State under socialist form of economy. All members have equal right in the benef

Sample survey and test marketing, Sample Survey and Test Marketing: Under...

Sample Survey and Test Marketing: Under this method some representative households are selected on random basis as samples and their opinion is taken as the generalized opinio

Demand, elasticity of demand

elasticity of demand

Deefine production, Normal 0 false false false EN-IN ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

State about the prices - price level, State about the prices - Price level ...

State about the prices - Price level Prices are of great significance in macroeconomics as indeed they are in microeconomics. Though, in microeconomics we are more interested i

Write Your Message!

Captcha
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