In class we said that the firms like firm X in perfect competition are price takers, it implies that if firm X raises its price, what will happen?
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In class we said that the firms like firm X in
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- If this is the case of a typical firm in a perfectly competitive market, what is most likely to happen?The following graph shows a firm’s marginal cost and average cost of production of raspberries. a. The equilibrium price at this market is $2.5. At this price, is the firm earning economic profit or is itincurring economic losses?b. Is the firm operating in a competitive market based on the given information? Why?c. Suppose the price of raspberries increases to $5. How would you answer a. and b. in this case?d. If the market is indeed competitive, what will happen after the price increase in c.? What will bethe final price and the long-term profit of the firm?Why don't firms in a competitive market have excess capacity in the long run?
- Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.Use a graph to show the situation that would prevail in a competitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Carefully explain your answer.Assume the firms in a perfectly competitive market are initially incurring economic losses. An increase in supply would cause existing firms' economic losses to decrease. True OR False?
- How equilibrium price is determined under perfect competition?You read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? a. The prices of agricultural products how will this affect the market equilibrium price of the agricultural products? Will it remain the same, increase or decrease?Perfect competition is an extremely rare type of market in the real world. This is because the conditions necessary for perfect competition are difficult to meet. Write about an example of perfect competition (or at least a market that is very close to perfect competition). Find an example of a market that seems to be perfectly competitive. Explain how your example satisfies the four conditions necessary for perfect competition. Do sellers in the market you’ve described brand themselves to consumers? Does this support the idea that this market is perfectly competitive? Explain. Do different sellers in the market you’ve described charge different prices for their product? Does your answer support the idea that this market is perfectly competitive? Explain. Does it seem as if the example you mentioned is allocatively efficient? In other words, does the market produce enough of this good (or does it produce too much or too little)? Explain.
- Consider the table of marginal costs of producing t-shirts in a perfectly competitive market below. If the market price is equal to $8, what is the profit maximizing number of t-shirts to produce and sell? Note the second column describes marginal costs. T-shirts Marginal Cost 0 - 1 6 2 3 3 6 4 9 5 11 6 14 Group of answer choices 0 1 2 3 4 5 6Why is a firm in a perfectly competitive market called a price taker?How does a firm in perfect competition decide its profit maximizingprice and quantity? ExplainTom, a math major, examines Jane's economics class notes and observes that when price-taking firms earn economic profit, they do not seem to produce a quantity that minimizes theircosts. Is he correct?Is there significance to this observation?
