Decent Essays
2 In a perfectly competitive market, who benefits from an event that lowers production costs for firms? Answer In a perfect competitive market, no one would benefit from the event that lowers the production of firms because of free entry and free exit in the competitive market. In perfect competition no one has the ability to affect the price. Both sides takes the market price as given and the market. Clearing price is the one at which there is neither excess supply nor excess demand i.e. suppliers will keep producing as long as they can sell the goods for a price that exceeds their cost of making one more (marginal cost of production). Buyers will go on purchasing as long as the satisfaction they derive from consuming is greater than…show more content…
How would the $100 per unit tax affect the firms profit per day? P=TR-TC P= (10*400)-(100*10)=4000-1000=$3000 Reduction is profit is
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