Skip to main content
Question

Does a competitive firm’s price equal its marginal
cost in the short run, in the long run, or both?
Explain.

Expert Solution

Want to see the full answer?

Check out a sample Q&A here
Blurred answer
Students who’ve seen this question also like:
Microeconomics
Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
Not helpful? See similar books
Microeconomics
Microeconomics
Perfect Competition. 7WNG
marketing sidebar icon
Want to see this answer and more?
Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*
*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.

Related Economics Q&A

Find answers to questions asked by students like you.

Q: Does a competitive firm’s price equal its marginal cost in the short run, in the long run, or both?…

A: According to economic theory,  all companies sell the same thing, market share does not affect the…

Q: Does a competitive firm’s price equal the minimumof its average total cost in the short run, in the…

A: A perfect competition(PC) market is one with many consumers and sellers producing identical…

Q: Describe how we can identify a competitive firm’s short-run supply curve.

A: In a monetary market all production continuously happens in the short run. The short run is the…

Q: How would you describe the demand curve for the purely competitive firm? For the industry?

A: Purely competitive firms are characterised by being price takers where decisions are made…

Q: “That segment of a competitive firm’s marginal-cost curve that lies above its average-variable-cost…

A: Click to see the answer

Q: What is the equilibrium or profit-maximizing quantity of production for a perfectly competitive…

A: Prefect competitive market is:- 1) in perfect competitive market, there are many number of sellers…

Q: List the requirements for a perfectly competitive goods market.

A: For a particular production process, there has to be some factors of production available. For…

Q: What is the relationship between marginal cost and the short-run supply curve for the purely…

A: Supply curve is the graphical representation of direct relationship between price and quantity…

Q: Consider the perfectly competitive market for tofu. Many people use tofu as a substitute for meat.…

A: A perfect market, also known as an atomistic market in economics, is defined by multiple idealizing…

Q: How is it possible for perfectly competitive firms to maximize profit in the short run versus in the…

A: Perfect competition: Under the perfect competition market, the price is decided by the demand and…

Q: Why are firms called price takers in a perfectly competitive market? Why do different firms produce…

A: In a perfectly competitive market firms act as price takers, meaning that they have no control over…

Q: Why does price equal marginal revenue for the perfectly competitive firm? What is the relationship…

A: In case of perfect competition price is determined by the industry through the demand and supply…

Q: Why does price equal marginal revenue for the perfectly competitive firm? What is the relationship…

A: Marginal revenue (MR) is the increase in revenue that results from the sale of one additional unit…

Q: why does price equal marginal revenue for the perfectly competitive firm? what is the relationship…

A: Perfect competition refers to the type of market organization in which there are many buyers and…

Q: With the aid of relevant graphs, elaborate on how prices are set in a perfectly competitive marke

A: Perfect or pure competition is a form of market in which a large number of perfectly informed buyers…

Q: What is the shape of the demand curve faced by the perfectly competitive firm? Explain your answer…

A: Perfect competition is the type of market structure in which there are many buyers and sellers of a…

Q: If a firm makes zero economic profit, it will exit the market in the long run. Do you agree?…

A: No economic profit is also referred as normal profit. Economic profit is calculated by subtracting…

Q: If a firm makes zero economic profit, it will exit the market in the long run. Do you agree?…

A: The zero or no economic profit is also referred as normal profit. Economic profit is calculated by…

Q: In the long-run, a perfectly competitive firm will earn what kind of economic profit?

A: In the long run, a perfectly competitive firm will earn normal/zero economic profit.

Q: Why is a firm in a perfectly competitive market called a price taker? How does a firm in perfect…

A: Price taker: It means a person or company accepting the prevailing prices in the market and unable…

Q: In a perfectly competitive market, how do we go from a short run equilibrium to a long run…

A: A perfect competitive market is one there many firms offer homogenous product to a large group of…

Q: Explain the fact that the short-run supply curve for a price taking firm is that segment of its…

A: The individual supply curve of short-run is the marginal cost of an individual at all of the points…

Q: What are the Characteristics of a Purely Competitive Market?

A: Characteristics of a Purely Competitive Market:   The Purely competitive market is the market…

Q: Suppose the book-printing industry is a competitive market, and it begins with a long run…

A: There are two possibilities, since you did not mention if the firm is incurring profit or loss in…

Q: 7.3.2 According to the figure below, a firm would shut down in the short run if the price is Price…

A: The shut down price is the minimum price a firm requires remaining open in the short run. That is, a…

Q: Suppose that a firm sells its output in a perfectly competitive output market. If the price at which…

A: Perfect competition refers to the situation where there are large number of prouder and consumers…

Q: What is the long run equilibrium price for the type of tiles that Art-tile produces? Why?   How…

A: Tiles Workers AVC ATC MC TC Revenue 1000 10 8 20 8 22000 9000 2000 19 8 13.6 7.2 50000 18000…

Q: What happens to the market and the firm in the long run?  Indicate clearly what happens to price,…

A: In the long-run, the demand matches the supply.

Q: explain why is the long run market supply curve horizontal in long run in perfect competitive…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: Will a perfectly competitive market display allocative efficiency? Why or why not?

A: Allocative efficiency is an economic state in which output is aligned with consumer needs in…

Q: Will a perfectly competitive market display allocative efficiency? Why or why not?

A: ANS Allocative Efficiency occurs when the total surplus is maximized. Where the total surplus is…

Q: When will a firm enter a competitive market?

A: Perfect competition refers to the situation where there are large number of prouder and consumers…

Q: Suppose a perfectly competitive firms demand curve is below the ATC curve. Explain the conditions…

A: Since the table is missing, it is difficult to answer for sub-parts 'a', and 'b'.

Q: competitive firm's are inherently inefficient Do you agree? Explain.

A: Monopolistic competition is a market where in large number of buyers exist sell homogenous products…

Q: If firms in a competitive industry incur an economic profit, what happens to supply, price, output,…

A: Economic profit is defined as difference between revenue that is received from the sale of a good or…

Q: help with this question If a competitive firm finds that its average variable cost is decreasing at…

A: The method by which businesses determine the price and quantity of output that will provide the most…

Q: Why is a firm in a perfectly competitive market called a price taker? Why do the price, MR and…

A: A perfectly competitive market structure is where many firms function but none of them are large…

Q: Why is a firm in a perfectly competitive market called a price taker? Why do the price, MR and…

A: In a perfectly competitive market there are large number of firms producing identical products thus…

Q: Why is a firm in a perfectly competitive market called a price taker? Why do the price, MR and…

A: Perfect competition: It refers to the market in which the firms are the price taker and the buyers…

Q: What is the difference between the demand curve observed by a perfectly competitive firm compared to…

A: A monopolistic market and a completely competitive market differ in various ways, including market…

Q: Does the state of mr=mc in a perfect competitive market mean that the firm is supposed to sell out…

A: Here the point E is the state of equilibrium between supply and demand. suppose the producer…

Q: How does a competitive firm determine the quantity that maximizes profit?

A: The markets are considered to be of utmost importance for the economies, because it assists in the…

Q: What are the characteristics needed for a perfectly competitive market?

A: In a perfect competitive market, there is a number of buyers and sellers, selling similar products.…

Q: Would the all perfectly competitive market 's marginal cost curve equal to supply curve

A: Market structure is a term used in economics to describe how different industries are classified and…

Q: Can a perfectly competitive firm set its own market price?

A: Perfect or pure competition is a form of market in which a large number of perfectly informed buyers…

Q: Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output…

A: Hi Student, Thanks for posting the question. As per the guideline we are providing answer for the…

Q: Give an example of a firm which competes in a competitive market. Explain. Suppose that the this…

A: Perfect competition is a benchmark, or "ideal market," to which real market designs can measure up.…

Q: i. Describe the factors that drive profits to zero in perfectly competitive markets in the long run.…

A: Perfect competition market is a an ideal structure where all sellers and buyers have symmetric and…

Q: must each perfectly competitive firm be in equilibrium if the industry is in the long-run…

A: Perfect competition refers to the situation where there are large number of prouder and consumers…

Q: Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output…

A: A competitive firm faces a parallel price line because in a competitive market, the firm is a price…

Knowledge Booster
Economics
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
  • Microeconomics
    Economics
    ISBN:9781337617406
    Author:Roger A. Arnold
    Publisher:Cengage Learning
    Economics (MindTap Course List)
    Economics
    ISBN:9781337617383
    Author:Roger A. Arnold
    Publisher:Cengage Learning
    Principles of Economics, 7th Edition (MindTap Cou...
    Economics
    ISBN:9781285165875
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
  • Principles of Microeconomics (MindTap Course List)
    Economics
    ISBN:9781305971493
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Principles of Economics (MindTap Course List)
    Economics
    ISBN:9781305585126
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Principles of Microeconomics
    Economics
    ISBN:9781305156050
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
  • Microeconomics
    Economics
    ISBN:9781337617406
    Author:Roger A. Arnold
    Publisher:Cengage Learning
    Economics (MindTap Course List)
    Economics
    ISBN:9781337617383
    Author:Roger A. Arnold
    Publisher:Cengage Learning
    Principles of Economics, 7th Edition (MindTap Cou...
    Economics
    ISBN:9781285165875
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Principles of Microeconomics (MindTap Course List)
    Economics
    ISBN:9781305971493
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Principles of Economics (MindTap Course List)
    Economics
    ISBN:9781305585126
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning
    Principles of Microeconomics
    Economics
    ISBN:9781305156050
    Author:N. Gregory Mankiw
    Publisher:Cengage Learning