The current price of hotdogs is $2. Given the market is perfectly competitive, what will happen to the price of hotdogs in this market in the long run?
Question
The current price of hotdogs is $2. Given the market is perfectly competitive, what will happen to the price of hotdogs in this market in the long run?
Solution
In a perfectly competitive market, if the price of hot dogs is above the marginal cost, it indicates that firms are making a profit. This will attract new firms to enter the market, increasing the supply of hot dogs. As supply increases, the price will be driven down. This process will continue until the price equals the marginal cost. In this case, the price will fall from 1.50 in the long run, assuming the marginal cost of $1.50 remains constant. This is because in the long run, in a perfectly competitive market, firms only make normal profits (zero economic profit) and price equals marginal cost.
Similar Questions
Suppose the city decides to regulate hot dog vendors by issuing permits. If the city issues only 20 permits and if each vendor continues to sell 100 hot dogs a day, what price will a hot dog sell for?
The "market basket" for an economy consists of two hot dogs and four hamburgers. In the base year of 2019 (CPI=1.00), the price of a hot dog was $3.00, and the price of a hamburger was $5.00.What is the CPI in 2020 if the prices of hot dogs and hamburgers are $3.25 and $5.25 respectively? Round your answer to two decimal places.
Homer and Ted are colleagues who enjoy consuming hotdogs. The demand curves for hotdogs for Homer and Ted are given as follows:Homer: p = 120 - qTed: p = 120 - 4q If Homer and Ted are the only two consumers of hotdogs the market demand curve is given by:Group of answer choicesp = 240 - 6Q for p < 30p = 120 - 6Q for all values of pp = 150 - 2Q for p < 40p =120 - (4/3)Q for all values of p.p = 120 - (4/5)Q for all values of p.None of above is correct.
Market EquilibriumSuppose both the supply and demand curves shift to the right. What would be the ultimate impact on the price of the product?The price will increase.The price will decrease.The price will remain the same.The price will depend on the magnitude of change in the demand and supply.
A typical consumer's food basket in the base year 2015 is as follows:- 20 Burgers at $10 each- 5 Coffee at $4 each- 5 Chicken at $5 eachIn 2016, a sudden incidence of mad cow disease in Australia causes beef shortage and the price of burger rises to $15 each. Coffee rises to $5 each, and the price of chicken increases to 7$ each in 2016. Given higher prices of all 3 goods in 2016, and also the fact that consumers are completely indifferent between 3 chickens and 1 burger. How does the cost-of-eating change in 2016 compared to 2015 if consumers can substitute between chicken and burger to minimize their cost of eating in 2016?
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.