(a) Assume that industry X is characterized by perfect competition, so every firm in the industry is earning zero economic profit. If the product price falls, no firms can survive. Do you agree or disagree? Discuss. (b) Using a hypothetical example, show the output supplied by a firm and the profit of the firm assuming that the firms are operating under a perfecetly competitive industry. When would you expect to see entry into or exit from the industry in the long run? What effect will entry into or exit may have on the market price.? How would you determine the lowest price at which the firm would sell its output in the long run?

(a) Assume that industry X is characterized by perfect competition, so every firm in the industry is earning zero economic profit. If the product price falls, no firms can survive. Do you agree or disagree? Discuss. (b) Using a hypothetical example, show the output supplied by a firm and the profit of the firm assuming that the firms are operating under a perfecetly competitive industry. When would you expect to see entry into or exit from the industry in the long run? What effect will entry into or exit may have on the market price.? How would you determine the lowest price at which the firm would sell its output in the long run?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter19: Externalities And Public Goods

Section: Chapter Questions

Problem 19.1P: A firm in a perfectly competitive industry has patented a newprocess for making widgets. The new...

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