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Many small boats are made of fiberglass, which is derived from crude oil. Suppose that

Chapter 14, Problem Problems and Applications 14.1

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QUESTION:

Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises. a. Using diagrams, show what happens to the cost curves of an individual boat-making firm and to the market supply curve. b. What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?

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QUESTION:

Many small boats are made of fiberglass, which is derived from crude oil. Suppose that the price of oil rises. a. Using diagrams, show what happens to the cost curves of an individual boat-making firm and to the market supply curve. b. What happens to the profits of boat makers in the short run? What happens to the number of boat makers in the long run?

ANSWER:

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Production costs involve fixed and variable costs incurred from manufacturing to distribution of products. All production costs transform into variable expenses in the long tenure. Usually, producers face decreasing cost trends in the initial days of production and increasing trends after reaching the bottom point.

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