Post a New Question

Economics

posted by .

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? (will production costs rise or fall and justify why)
b. The price you can charge for your modeling services? why? (will production costs rise or fall and justify why. How does the supply and/or demand curve shift and what happens to equilibrium prices?)
c. Profits in home remodeling? why? (Is this same as economic profits? will they rise or fall and justify answer)

  • Economics -

    a. Your firm’s costs of production? Explain.
    As firm is making short-run profits, new firms will enter into the market. Demand for input factors will increase. So, inputs will become costlier for increasing-cost industry. We can say that costs of production will increase.

    b. The price you can charge for your remodeling services? Why?
    The price you can charge for your remodeling services? Why?
    As costs of variable and other input will increase. Prices are dependent on marginal costs. So, prices will also increase.

    c. Profits in home remodeling? Why?
    As discussed, new firms will enter because of current short run profits. This will increase competition and will pressurize prices. We have seen that costs are also increasing. We can say that Profits will decrease in long run and firms will make normal profits only.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Microeconomics

    Suppose rampant fears of Mad Cow disease cause a decrease in demand for beef. What will be the short-run effects of the declining demand for beef on the firm and the market?
  2. economics

    suppose a competitive market consists of identical firms with a constant long run marginal cost of $10. Suppose the demand curve is given by q=1000-p a)What are the price and quantity consumed in the long run competitive equilibrium?
  3. economics

    perfectly competitive industry. Each firm having identical cost structures. long-run average cost is minimized at an output of 20 units. Minimum average cost is $10 per unit. total market demand is Q=1500-50P. What is the long-run …
  4. economics

    This is going to be really long, but I want to see if my answers are correct. This is problem number 10.10 in my Intermediate Microeconomics book. A perfectly competitive painted necktie industry has a large number of potential entrants. …
  5. Micreoeconomics

    1. Assume a perfectly competitive constant cost industry, currently in long-run equilibrium. Market demand in the industry is given by Q = 1500 - 25P. The short-run market supply curve is given by: Q = 15P - 100 for P B 10 = 0 for …
  6. Managerial Econmics

    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 …
  7. Economics

    The handmade snuffbox industry is composed of 100 identical firms, each having short – run total costs given by STC = 0.5q2 + 10q + 5 and short – run marginal costs by SMC = q + 10 where q is the output of snuffboxes per day. a) …
  8. Economics

    The handmade snuffbox industry is composed of 100 identical firms, each having short – run total costs given by STC = 0.5q2 + 10q + 5 and short – run marginal costs by SMC = q + 10 where q is the output of snuffboxes per day. a) …
  9. Economics

    If all company in a certain industry are earning economic profits now, in long run what will happen?
  10. Microeconomics

    A perfectly competitive industry has a large number of potential entrants. Each firm has an identical cost structure such that long run average cost is minimized at an output of 10 units (qi=10 ). The minimum average cost is R5 per …

More Similar Questions

Post a New Question