Chapter 9 [24]
Section 9.1 [24.1]: Preview of the Four Market Structures
1.1 price, quantity sold
1.2 horizontal
1.3 market
1.4 negatively sloped
Section 9.2 [24.2]: The Firm's Short-run Output Decision
2.1
2.2
total revenue, economic cost explicit, implicit
2.3
2.4
2.5
2.6
2.7
2.8
2.9 price price, marginal cost decrease, increase
40, is average total cost, zero price, marginal cost a. The worker's tardiness increased the firm's profit. b. The firm should produce fewer deliveries, since P < MC.
2.10 a. Labor Cost:
Material Cost:
Total Cost:
Marginal Cost:
240, 264, 288, 312, 336, 360
5, 29, 41, 47, 50, 52
246, 295, 331, 361, 388, 414
--, 2.00, 5.00, 9.00, 13.00 b. The profit maximizing output is 50 scarves (P = MC = $9.00).
Section 9.3 [24.3]: The Firm's Shut-Down Decision
3.1 total revenue, variable cost
3.2
3.3
3.4
3.5
operate, total revenue, variable cost
minimum average variable cost operate, price, average variable cost; exit, average total cost, price
0.72/bushel
3.6 a. The break-even price increases while the shut-down price is unchanged. b. The break-even price and shut-down price both increase. c. The break-even price increases, and the shut-down price increases.
3.7 a. 168, 56, 224, 280, ---
180, 60, 240, 300, 4.0 b. Yes, continue operation with 14 workers since TR > TVC. c. Yes, profit would increase with 15 workers, since P > MC.
3.8 Total Revenue of $35,000 exceeds Total Variable Cost of $30,000 (the other $20,000 in costs being fixed -- and 'sunk' -- costs), and he will not shut down (he is bluffing.)
Section 9.4 [24.4]: Short-Run Supply Curve
4.1
4.2
4.3 quantity supplied, price marginal cost, market
700
150

Perfect Competition 151
4.4 demanded, supplied, profit, price, marginal cost, zero, price, average total cost
4.5 competitive
4.6 Production of computer chips requires a large initial investment in sophisticated physical plant and specialized knowledge.
4.7 a. b.

152 Chapter 9 c.
4.8
4.9

Perfect Competition 153
Section 9.5 [24.5]: The Long-run Supply Curve for an Increasing Cost Industry
5.1
5.2 industry output, market price
arrow up, arrow up, arrow down
5.3
5.4
5.5
5.6
5.7 increases, positively sloped
96, 16, 16, 2400 enter, average; price, average total cost
price production costs
5.8 a. b. Using the midpoint formula, 0.92 = 1.64/1.78.
5.9 a. Caribbean, Latin America, Australia and South Africa b. The (domestic) U.S. price of sugar would be $0.24/lb. or greater.
5.10 Output
400
800
1200
AC
$30
$36
$42
Section 9.6 [24.6]: Short-Run and Long-Run Effects of Changes in Demand
6.1
6.2 diminishing returns arrow up, arrow down, arrow up
6.3 jump, slide
6.4 steep, large

154 Chapter 9
6.5 a.
Short run: % change in price = (24 / (1.0 + 0.2)) = 20%, or $500 to $600.
Long run: % change in price = (24 / (1.0 + 0.5)) = 16%, or $500 to $580. b. Short-run price: $600. Long-run price: $580.
Section 9.7 [24.7]: Long-Run Supply for a Constant-Cost Industry
7.1 average, horizontal
7.2
7.3
7.4 small, don't change horizontal arrow
arrow up, arrow up, arrow horizontal
7.5 a. b. No, population growth does not affect the long-run equilibrium price of a haircut.
7.6 If the butter industry is a constant-cost industry, the decrease in demand will reduce the price in the short-run as the market moves downward along the short-run supply curve. Negative economic profit in butter production will cause firms to exit, and exit will continue until the price reaches its initial level. In other words the new demand curve intersects the horizontal long-run supply curve at a smaller quantity but the same price.
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