increased output?Will your answer change if the government imposes a price ceiling? If demand inereases with fixed supply,price and profits increas.The pric increase induces the firms in the industry to increase output Also,with positive profit,firms enter the industry,shifting the supply curve to the right.This results in a new equilibrium with a higher quantity produced and a price that earns all firms zero eopnomic profit.With an effective price ceiling.profit will be lower than withoutthece educing the terthe industry With economic proft,no firmenterand there isno shft in the supply curve. 13.The government passes a law that allows a substantial subsidy for every acr of land used to grow tobacco.How does this program affect the long-run supply curve for tobacco? A subsidy on tobacco production decreases the firm's costs of production. These cost decreases encourage other firms to enter tobacco production,and the supply curve for the industry shifts out to the right 14.A certain brand of vacuum cleaners can be purchased from several local stores as well as from several catalogue or web site sources. a.If all sellers charge the same price for the vacuum cleaner,will they all earn zero economic profit in the long run Yes by charging the same price they will all earn zero economic profit in the long run.If economic profit was greater than zero then firms would enter the industry and if economic profit was less than ero firms would exit the industry. b.Ifall charge the same price and one local building in which he d e asiness,paying no rent,is this eller earn ninga positive economic profit? No this seller would still earn zeroeconomic profit.If he pays no rent then the accounting cost of using the building is zero,but there is still an opportunity cost, which represents the value of the next best alternative use ofthe building. c.Does the seller who pays no rent have an incentive to lower the price he charges for the vacuum cleaner? No he has o to chargea ower price lower his price for that good.By charging a lower price,the firm is no longer maximizing profit 二、EXERCISES 1.The data in the following table give information about the price (in dollars) for which a firm can sell a unit of output and the total cost of production. a.Fill in the blanks in the table.increased output? Will your answer change if the government imposes a price ceiling? If demand increases with fixed supply, price and profits increase. The price increase induces the firms in the industry to increase output. Also, with positive profit, firms enter the industry, shifting the supply curve to the right. This results in a new equilibrium with a higher quantity produced and a price that earns all firms zero economic profit. With an effective price ceiling, profit will be lower than without the ceiling, reducing the incentive for firms to enter the industry. With zero economic profit, no firms enter and there is no shift in the supply curve. 13. The government passes a law that allows a substantial subsidy for every acre of land used to grow tobacco. How does this program affect the long-run supply curve for tobacco? A subsidy on tobacco production decreases the firm’s costs of production. These cost decreases encourage other firms to enter tobacco production, and the supply curve for the industry shifts out to the right 14. A certain brand of vacuum cleaners can be purchased from several local stores as well as from several catalogue or web site sources. a. If all sellers charge the same price for the vacuum cleaner, will they all earn zero economic profit in the long run? Yes by charging the same price they will all earn zero economic profit in the long run. If economic profit was greater than zero then firms would enter the industry and if economic profit was less than zero firms would exit the industry. b. If all sellers charge the same price and one local seller owns the building in which he does business, paying no rent, is this seller earning a positive economic profit? No this seller would still earn zero economic profit. If he pays no rent then the accounting cost of using the building is zero, but there is still an opportunity cost, which represents the value of the next best alternative use of the building. c. Does the seller who pays no rent have an incentive to lower the price he charges for the vacuum cleaner? No he has no incentive to charge a lower price because this will lower his economic profit. Given all firms sell an identical good, they will charge the same price for that good. By charging a lower price, the firm is no longer maximizing profit. 二、EXERCISES 1. The data in the following table give information about the price (in dollars) for which a firm can sell a unit of output and the total cost of production. a. Fill in the blanks in the table