Economics and Perfect Competition Essay

Martinez Company’s relevant range of Production is 7,500 to 12,500 units. When it produces and sells 10,000 units, its unit costs are as follows:

The point of profit maximization for the firm in the given scenario occurs at a quantity of 8 units. At this point they have maximized their profit and as you can see to go beyond this point would cause the firm to incur economic losses.

A negative effect of oligopoly is that it is largely inefficient – economically and in

In a monopolistically competitive industry, the goods sold, while not perfect substitutes, can be viewed as acceptable substitutes by most people. As a result, if Firm A raised the price of its good substantially, consumers would decrease the quantity demanded from Firm A and would move to other firms selling similar products. As a result, Firm A would sell few units at the new higher price. As the quantity a firm sells falls, so does its percentage of sales in the industry, also

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline. Industry X is:

1) If a monopolist's price is $65 a unit and its marginal cost is $25 for the last unit produced,

The new audio greeting message affects the demand for greeting cards. The demand for greeting cards decreases because greeting cards and audio greeting cards are substitutes. The demand curve for greeting cards pads shifts leftward, from D0 to D1 in Figure 4.6. Simultaneously the fall in the cost of producing a greeting card affects the supply. The fall in the cost of producing greeting cards increases the supply and the supply curve shifts rightward, from S0 to S1 in Figure 4.6. At the initial price of a greeting card, $5.00 in Figure 4.6, there is a surplus of 60 greeting cards per week. The surplus forces the price lower, so the equilibrium price of a greeting card

| (Exhibit 9: Total Cost for a Perfectly Competitive Firm) If the market price is $4.50, the profit-maximizing quantity of output is _______ units.

| An oligopolist that faces a kinked demand curve is charging price P = 6. Demand for an increase in price is Q = 280  40P and demand for a decrease in price is Q = 100  10P. Over what range of marginal cost would the optimal price remain unchanged?Answer

11. Take a look at the exhibit above. At what price will firm sell its ' output to maximize profit?

(Demand Under Perfect Competition) What type of demand curve does a perfectly competitive firm face Why

In the short run the perfect competition equilibrium can be found by graphing the marginal cost (MC), average total cost (ATC) and marginal revenue (MR) curves. In perfect competition the price is equal to the average revenue, which is equal to the marginal revenue and these are all constant, giving an infinitely elastic demand curve for the firm. The demand curve is “perfectly price elastic” due to the homogeneity of the products supplied, where each supplier, as a price taker, must focus on a single price. Given this, the only choice a supplier has in the short run is how much to produce. For profit maximisation to occur marginal costs (supply curve) must equal marginal revenue (demand curve). Profit maximisation is assumed to mean the maximisation of normal economic profit (i.e. revenue that covers the

A firm with total revenues of $150 million, explicit cost of $90 million, and implicit

l. How much competition does the firm have? Is the competition powerful? List the firm and the competition’s current market share if given in the case.

Competition failure or monopoly may result from natural monopoly where it costs incurred in production becomes lower when only one firm is involved in production than several firms producing the same output. In a monopolist market under-production, higher prices become dominant contributing to market inefficiency. Winston cites cases of misuse of monopoly power can lead to market failures and sometimes may lead to acute shortage of essential commodities (130).