What is difference between short run and long run? Is the amount of time that separates the short run from the long run the same for every firm?

Jubail Industrial College

Department of Business Administration

BUS 151: Microeconomics

Semester 441

Assignment 2

Notes:

• Deadline for Submission: November 24, 2022, 3:00 PM

Question 1:

1. What is difference between short run and long run? Is the amount of time that separates the short run from the long run the same for every firm?
2. What is the law of diminishing returns? Does it apply in the long run?
3. Explain why the marginal cost curve intersects the average total cost at the level of output where average total cost is minimum.

Question 2:

Wireless, high-speed internet is provided for free in the airport city of Juha.

1. At first, only a few people use the service. What happens of a good is this and why?
2. Eventually, as more people find out about the service and start using it, the speed of connection begins to fall. Now what type of a good is the wireless internet service?
3. What problem might result and why? What is one possible way to correct this problem.

Question 3:

1. What are the four most important ways a firm becomes a monopoly?
2. If patent reduce competition, why does government grants them?

Question 4:

1. What is a price take? When are firms likely to be price taker?
2. What is the difference between a firm’s shutdown point in the short run and in the long run? Why are firms willing to accept losses in the short run but not in the long run?
3. When are firms likely to enter an industry? When are they likely to exit an industry?

Question 5: By giving the examples of price ceiling and price floor enacted by governments discuss their consequences on economy. How market can solve the problems created by a government’s intervention in the price system.