When preparing government-wide financial statements at the end of the fiscal year, Meen County recorded an adjusting entry for s
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Answer:
b. supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity
Explanation:
This question isn't complete. The full question can be found here: https://www.chegg.com/homework-help/questions-and-answers/market-diamond-rings-closely-linked-market-high-quality-diamonds-large-quantity-high-quali-q34930995
High-quality diamonds are an input used in the production of diamond rings. If the supply of high quality diamonds increases, it implies that the production of diamond rings would increase. As a result of the increased production, the supply curve would shift to the right. This would lead to an excess of supply over demand known as a surplus. This would cause equilibrium price to fall and quantity to rise.
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Answer:
Increase quantity to where AC = MC = D=AR=MR
Explanation:
A perfectly competitive market is where there are many firms in the industry producing homogeneous products. There is ease of entry and exit into and out of the market. They are price takers and earn normal profits in the long-run. In order to maximize profits, a firm in a perfectly competitive industry should produce an the quantity where its average cost is equal to marginal cost when AR = MR = D. In other words, when the AC and MC curves intersect with AR = MR = D curve.
<em><u>Please refer diagram</u></em>
The firm is currently producing at a point where AC > MC at quantity 1000. In order to reach AC = MC, the firm has to increase its quantity to Qe. As it increases quantity, although marginal cost increases, average cost falls because now fixed costs are spread over a larger quantity of output.
At Qe, the three curves intersect and is the point where this firm can maximize its revenue (Price = Pe). At a price higher than this, it would lose customers since there are many others producing the same product and customers can easily shift to another.
