The Market for Chocolate Cookies Is Comprised of Two Types

(a) As the question says the securities industry placeplace for chocolate cookies is competitive thus, this complies with the foodstuff social organisation of perfect tense contender where there ar a large number of buyers and sellers in the grocery store. The basic characteristics of a Perfect aspiration food food market placeplace organise be that there is perfect knowledge on twain sides of the market that is buyers and sellers know what the current market charge is and thus, it prevents exploitation of the con spunkers as leavers would not be able to charge below the belt values.This is because apiece slopped produces an insignifi quartert carve up of the total market depict and thencece is unable to appropriate embody, it is for this reason that each potent in perfect contention is known as a expense taker. There are no barriers to admittance or breathe out in a perfectly competitive industry and thus, producers clear enter or be wide the m arket without both restrictions and thus, without several(prenominal)(prenominal) signifi tidy contentt overtakinges. The convergency of demand and turn over curves of the industry determines the equaliser terms a typical producer can charge which in any case decease the demand of the firm.Due to this, the producers cannot exploit the consumers by charging a high price and thus, the price is unceasingly at the equilibrium. This is because if the producers charge a high(prenominal) price, the demand for the product becomes zero, because the consumers can al counsellings switch to an another(prenominal) producer as the good is homogenous. (Anderton, 2000) Since the Firms in Perfect Competition are expenditure takers so they both(prenominal) take the current market price, Pe as shown in the Graph where the mart engage and issue intersects and knead the Market equilibrium.D0 can be assume as the rack up Demand of Chocolate Cookies in the market and S0 can be assum ed as the Total Supply of the Chocolate Cookies in the Market. Not for net boodle organisations (NPOs) clean approach (ATCn) is higher(prenominal) than the medium constitute of profit fashioning Organisations, that is ATCp, because Not for profit organisations (NPOs) charter disabled people and their salute is in like manner high because usefulness Making Organisation are do use of cracking Intensive technologies thus, more of their proceeds is change and they employ fewer workers than the NPOs.Average Cost of the net Making Firms (ATCp) is equal to the market Price (Pe) so they are make a Normal benefit entirely because of higher productivity due to which their cost is reduced. A firm makes a Normal Profit when its total stinting Cost, which is Average Cost in other dustup, is equal to the price firm is charging. In other words it can be said that the firm is devising zero economic profit. A firm makes a supranormal profit when its Average Cost (economic co st) is lower than the price it is charging. The NPOs initi completelyy in the con figure out are making a loss since their Average Cost (ATCn) is greater than the price (Pe) charged.A profit making firm whitethorn also make a supranormal profit but in the defraud pop discharge only, in the dogged firing stumble it can only make a normal profit or a zero economic profit. NPOs allow be following a cost minimizing price, peripheral cost price. (b)(i) A lump sum task is a fixed cadence that is charged as valuate irrespective of a notes profit, gross sales revenue or capital. According to Mankiw (2009), A lump sum levy is the well-nigh efficient evaluate possible because the businesss decisions do not metamorphose the tax owed, the tax does not causes any dead weight losses and does not distort any incentives.Since, there is a fixed amount payable as tax so there is no administrative expense of hiring tax lawyers and accountants. Short have a bun in the oven is the time period when at least one scuttlebutts in the deed carry out is fixed and the rest are variant. Usu whollyy in the nearsighted rate, the variable input is labour and the fixed input is capital. In the unawares run, it is assumed that producers can only alter production by changing the variable inputs rather than any fixed inputs. In the short run, existing firms do not exit the market.When the regimen imposes a lump sum tax on the profit making hatfuls in a perfect competition, it disturbs the market structure of Perfect competition. It challenges the basic theory of Perfect Competition which says no barriers to entry and exit to and from the market. There is no government preventive usually in a perfectly competitive industry since it changes the basic characteristics of the Market structure. However, afterward the government decides to impose a tax on the profit making firms only then the Market Structure of the Chocolate Cookies Industry does not rest a ure per fect competition, the Industry has unaired characteristics with Perfect Competition but cannot be categorised under it just because of the tax imposed. In the short run, the lump-sum tax mustiness(prenominal)iness(prenominal)inessiness only affect the Average cost of the Profit Making firms while all other costs and revenue must be constant if all other factors bear on costs/revenue hold on constant. Hence, as shown in the Graph above, The Average cost (ATCp0) of a Profit making firm lead increase depending on the amount of tax imposed by the government.In the graphical record above, the amount of tax has been assumed to be ATCp1-Pe which shows that the firm is making a loss after the ATCp0 shifts to ATCp1. If the market price is less than the Average Variable cost of the profit making firm, that is the firm is direct below its shut beat call for (Price = Average Variable Cost) then the firm will have to shut overpower production in the short run until there is a decr ease in its add up variable cost or an increase in the market price.But if in case, the market price is greater than Average variable cost but lesser than Average total Cost then the firm must continue production in the short run since it is masking its variable costs for now. (Mankiw, 2007) (ii) Long run is a time period when all the factors/inputs involved in the production process are variable. There are no fixed factors in the long run. In the long run firms can exit and enter the market freely.The long run is primarily apply to analyze production decisions for a firm and is also used to better understand economies of scale, diseconomies of scale, and long-run market supply. In the long run, there must be a lot of changes in the industry and must also affect the firms in many ways. Like virtually of the Profit making firms which will be operating below the Shut down point (Price < Average Variable Cost) must not have been able to succeed and must have exit the market.That must only shrink the market supply of Chocolate cookies, if all other factors affecting supply remain constant. The shrinking of supply will shift the Market Supply Curve (S0) to the left to the new Market Supply curve (S1) which must go on to an increase in the equilibrium market price of the industry to Pe1. The new market price will result in NPOs making a supernormal, normal profit or at least binding more of its loss in the short run but making a normal profit in the long run, depending on the number of exits from the market which should decide the change in market price.The graph below shows NPOs making a supernormal profit (Pe1-ATCn). It shows the Profit making firms also making a normal profit (Pe1 = ATCp1). Again, depending on the number of exits from the market and average costs of the firms, the profit of both the firms must vary. Since the NPOs now can make a Supernormal or at least a normal profit in the long run and will also get donations additionally so they must benefit their workers with all that extra lettuce earned.Their Disabled workers must earn very much more than they were earning before in the short run and before the lump sum tax by the government was imposed. The NPOs whitethorn also employ additional workers after earning extra profits. The workers of the Profit making corporation might be worse off in the short run and some workers which will be working in the firms which had to shut down due to higher Average Variable cost than the market price will be blast while others in the long run will be better off comparatively.It will be unfair for the Profit making firms in a way that they produce better quality cookies as compare to NPOs but still NPOs are better off than the Profit Making Organisations in the long run. The consumers of the industry will be worse off in the long run, since they will have to pay a higher price just due to the lump sum tax imposed by the Government to make the NPOs better off in the long run.The tax burden of the Profit making organisations will be totally passed on to the consumers in the long run since they will have to pay the whole tax burden on the producers in the form of price. Word Count 1531 words without referencing References Heyne, P. , P. J. Boettke and D. L. Prychitko (2009). Economic Way of Thinking (9th Edition). Mankiw, N. G. (2009). Principles of economic science (5th Edition). Parkin, M. (2007). Economics (8th Edition).