3. Consider a firm operating in a perfectly competitive market. Answer the following questions as they pertain to this firm. a) Explain with the aid of diagrams why the SR supply curve is equal to MC above minimum AVC. b) How does the firm determine the price it charges? Show this graphically. c) What possible outcomes can be realized in terms of the profit situation after price has been set. Show each of these graphically.

3. Consider a firm operating in a perfectly competitive market. Answer the following questions as they pertain to this firm. a) Explain with the aid of diagrams why the SR supply curve is equal to MC above minimum AVC. b) How does the firm determine the price it charges? Show this graphically. c) What possible outcomes can be realized in terms of the profit situation after price has been set. Show each of these graphically.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter8: Perefect Competition

Section: Chapter Questions

Problem 5SQP

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Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the firm not simply increase its profits by selling an extremely high quantity?
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