(a) What are the basic assumptions that need to be satisfied for a market to be called perfectly competitive? List them one after the other. (b) What must be satisfied (in the general case) for a firm to be maximizing profit in the short run? (That is, what condition must hold at the profit-maximizing output level for a general firm in the short run?
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(a) What are the basic assumptions that need to be satisfied for a market to be called
(b) What must be satisfied (in the general case) for a firm to be maximizing profit in the short run? (That is, what condition must hold at the profit-maximizing output level for a general firm in the short run?)
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- Assume that the market determined price is $10 in a perfectly competitive industry. A firm is currently producing 100 units of output. Average total cost is $8 while marginal cost is $8 and average variable cost is $6. Is the firm producing the profit-maximizing level of output? Why or why not? If not, what should the firm do?Assume that the above cost data is for a perfectly competitive firm. Using this data answer the following: (a) If the market equilibrium price that this firm charges is $50, what level of output must this firm produce to maximize its profit? (b) What would be the amount of profit that this firm would earn if it produced at the profit-maximizing level of output?In a purely competitive market at its long-run equilibrium, which of the following is not true? a The marginal benefit of the last unit of the product equals the marginal cost of producing that unit. b The maximum willingness of buyers to pay for the last unit of the product equals the minimum acceptable price for the seller of that unit. c Price equals marginal cost, and they are equal to the lowest attainable average cost of production. d The combined amount of consumer and producer surpluses is at its minimum possible.
- Perfect Competition: What are the key features of a perfectly competitive market? Many buyers and sellers Undifferentiated products No transaction costs No barriers to entry and exit Perfect information about the price of a good Will a perfectly competitive firm automatically close its doors if it is not making a profit? Why or why not? Make sure to discuss the different time frames. Yes it will because if the market price that a perfectly competitive firm faces is below average variable cost at the profit maximizing quantity of output then that is not good. Suppose that you are the manager of a company that vaccinates human beings for biological diseases. Your company uses two inputs to produce vaccinations: physicians and laboratories. However, this is a short-run analysis where physicians are variable but laboratories are fixed. Suppose that each physician costs $500 per day (for an annual salary of about $175,000) and the daily cost for the laboratory is $1,500 (for…In principle, how do we determine a perfectly competitive firm's profit-maximizing output and maximum profits given information about the market clearing price, and about the marginal cost and average total cost curves of the firm? Explain in words.What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be A. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market. B. many buyers and nothingsellers, with all firms selling identical products, and substantial barriers to new firms entering the market. C. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market. D. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.
- Suppose that the perfectly competitive market for wheat spaghetti is in long-run equilibrium. Suppose also that campaigns for fighting obesity make students on lots of college campuses in the US aware of the fact that excessive pasta (including spaghetti) consumption has an adverse effect on body weight, and these campaigns provide an incentive for students to restrict spaghetti consumption. How do the campaigns described above affect the market for wheat spaghetti in the US, that is does the supply or the demand curve for wheat spaghetti shift and in what direction? How are the equilibrium price and quantity of wheat spaghetti affected in the short run? What happens to the short-run profit of the typical producer of wheat spaghetti in the US? What will be the price of wheat spaghetti in the long run? What profit will producers of wheat spaghetti make in the long run? Explain how this outcome is achieved. Use two graphs: one showing the market supply and demand curves for wheat…Modified True or False: State whether each statement is true or false. If the statement is false, briefly explain why it is so, and then restate it to make it true. In the long-run competitive equilibrium, price, short-run marginal cost, short-run average cost, and long-run average cost are all equal, and economic profits are zero.Canadian red wheat is a normal good, in a perfectly competitive market that is in long-run equilibrium. There occurs a boom in the economy—incomes rise. What effect does this have on short-run equilibrium? Explain concisely the step-by-step process by which the industry returns to long-run equilibrium. Your answer should include the effects on the individual firm's output and profit, as well as any industry-wide adjustments that take place. Show graphically the relationship between the firm and the industry.
- If a firm in a perfectly competitive market maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output?I need help describing the key assumptions that characterize a perfectly competitive market and need to explain the profit maximization condition of a competitive market. ( Using appropriate diagrams deemed necessary)In a perfectly competitive market, please compare the short run and long run prices in an increasing cost industry. Are they same? If yes, what drives the equal prices? If not, what is the main reason of that difference?