Consider a retail firm that produces and sells fashion accessories including silver-plated bracelets. This firm is one of many firms participating in a highly competitive national market for silver-plated bracelets. The market price for silver-plated bracelet is $27 and the market is in equilibrium. Firms in the market and potential entrants have the same cost structure, and the current market quantity is 39,000 bracelets. At this firm, the cost of labor and materials used in production is described by the equations: MC = 1 + 0.1q and AVC = 1 + 0.05q. In addition to these costs, the firm faces a cost of $2000 for its machinery and equipment.

PART A - What is the quantity of silver-plated bracelets traded at the firm?

PART B - What is the profit from the quantity of silver-plated bracelets

PART C - How many firms are currently operating in the market for silver-plated

PART D - Now consider that lower input prices led to an increase in the supply of leather bracelets, a substitute consumption good. In the market for leather bracelets, the market price, and quantity of leather bracelets traded changes, and this impacts the competitive market for silver-plated bracelets. As a result of this shock, the market for silver-plated bracelets adjusts in the short run.

Given the expected market adjustments in the short run, which is more likely the new current market price? As a result of the market shocks and expected short-run adjustments, the new current market price is more likely to be ($25, $27, $32)

PART E - Given the expected market adjustments in the short run, what is the current market quantity?

PART F - FILL IN THE BLANK

In comparison to the initial condition, what long-run adjustments should be anticipated as the market moves towards the long-run equilibrium?

As the market adjusts in the long run, one would expect that the number of firms in the market will BLANK and the market quantity will BLANK.

CHOICES

decrease

have an ambiguous change

increase

remain the same

PART G -

Consider that there are no further external shocks to the market for silver- plated bracelets, and the retail firm remains in the market as the market adjusts in the long run. In comparison to the initial condition, what long-run adjustments should be anticipated as the market moves towards the long-run equilibrium?

FILL IN THE BLANK

Compared to its initial outcome, as the market adjusts in the long run one would expect that the retail firm's profit-maximizing quantity will BLANK the price the firm charges will BLANK , and its economic BLANK will BLANK.

CHOICES

be higher

be lower

change ambiguously

loss

profit

remain the came

PART H - Given the current firm and market conditions anticipated in the long run, what is the lowest price at which the retail firm will remain in the market?