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- If new technology in a perfectly competitive market brings about a substantial reduction in costs of production, how will this affect the market?Would independent trucking fit the characteristics of a perfectly competitive industry?Suppose that the market price increases to 6, as Table 8.14 shows. What would happen to the profit-maximizing output level?
- 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?4. Which formula represents the profits for a firm? (check all that apply) (AC=average cost, MC=marginal cost, AVC=average variable cost, P=price, Q=output, TC=total cost) a. PQ-TC b. PQ-AC c. Q(P-AC) d. P(Q-AC) e. Q(P-MC) f. P(Q-AVC)5. (a) What do we mean by “price taker”? Explain why a firm in perfect competition is a price taker.How is this price determined? Explain. (b) “The demand curve for a perfectly competitive firm ishorizontal and it is also the firm’s marginal revenue curve.” Explain.
- 2. Explain, with the aid of a graph, the short-run position of a perfectly competitive firm making economic loss.A9 The characteristics of a "perfectly competitive" market require that there is 1) a large number of firms, 2) producing products that are identical across firms, 3) in an industry where there are no barriers to entry. It's unlikely that any industry accurately reflects these extreme assumptions, but what industries can you think of that do display these characteristics at least to some extent? Try to identify the limits of your example in reflecting "perfect" competition.1. Which of the following represents the firm's short-run condition for shutting down? a. shut down if TR < TC b. shut down if TR < FC c. shut down if P < ATC d. shut down if TR < VC
- 1. Suppose a perfectly competitive firm is operating in short run. The information of MR, Q,ATC and AVC are 15 taka, 60 unit, 45taka and 35 taka respectively. Calculate firm’sprofit/loss and total fixed cost. From these calculations and based on all the giveninformation, can you conclude about the firm’s decision in short run? Explain your reasoningwith the help of a suitable diagram. Show all the relevant information in yourdiagram.[Q=profit maximizing output and MR=marginal revenue]Question 3 The current market price in a competitive industry is $15. Every firm in the industry operates a technology that implies costs described by the function C = 12.5 + 0.3Q2. In the future, the technology is expected to change, and the new cost function will then be C = 10 + 0.2Q2. How much profit is the typical firm making today and in the long run? O. Profit is zero both today and in the long run. O. Profit is 125 both today and in the long run. O. Profit is 175 today and zero in the long run. O. Profit is 250 today and 125 in the long run.6.a) Figure 8.7 shows cost curves for Penny's Parasols, a perfectly competitive firm. At which of the point would Penny's Parasols be certain to close down? A, B, C, D, or E. Explain: b) Figure 8.7 shows cost curves for Penny's Parasols, a perfectly competitive firm. At which point(s) would Penny's Parasols endure economic losses, but continue to produce in the short run? D, F, A, C, or E. Explain: 6.c) Which point in Figure 8.7 represents a break-even situation for a perfectly competitive firm? A, B, C, D, or E. Explain: 6.d) At which point in Figure 8.7 would a perfectly competitive firm earn the same profit, or suffer the same loss, by producing rather than by shutting down? A, B, C, D, or F. Explain: Choose and explain your answer above thoroughly--graphical, algebraically, numerically. Kindly see screenshot attached. Please explain with as much detail as possible, using the graph in your answer.
