Author Question: With regard to its economic profits and economic losses, how is the short run different from the ... (Read 86 times)

Garrulous · **on:** Jun 29, 2018

With regard to its economic profits and economic losses, how is the short run different from the long run for a perfectly competitive firm?

What will be an ideal response?

Question 2

An auction of the leases to drill for natural gas on about 55,000 acres on the Roan Plateau in western Colorado in August 2008 generated nearly 114 million, a record high for onshore energy lease sales in the lower 48 states.

What is going on in the rental market for land? A) There is a decrease in the value of marginal product for an acre on the Roan Plateau, leading to an increase in the equilibrium rental rate.
B) There is an increase in the value of marginal product for an acre on the Roan Plateau, leading to a decrease in the equilibrium rental rate.
C) There is an increase in the supply of acreage on the Roan Plateau, leading to an increase in the equilibrium rental rate.
D) There is an increase in the value of marginal product for an acre on the Roan Plateau, leading to an increase in the equilibrium rental rate.

ryansturges · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The firm can make an economic profit, incur an economic loss in the short run, or make zero economic profit in the short run. In the long run, however, the only possible outcome is zero economic profit. An economic profit attracts entry by new firms and economic losses lead to exit by some firms. Thus, after entry or exit is complete in the long run, the remaining firms will make zero economic profit.

Answer to Question 2

D