Perfect competition occurs when none of the individual market participants (buyers and sellers) can influence the price of the product. Under perfect competition, marginal revenue (MR) and average revenue (AR) are thus both equal to the market price. The situation in which a firm makes an economic profit is identified as one of the possible short-run positions of a firm under perfect competition. Illustrate the given short-run position and explain the situation with reference to your graph.
Perfect competition occurs when none of the individual market participants (buyers and sellers) can influence the price of the product. Under perfect competition, marginal revenue (MR) and average revenue (AR) are thus both equal to the market price. The situation in which a firm makes an economic profit is identified as one of the possible short-run positions of a firm under perfect competition. Illustrate the given short-run position and explain the situation with reference to your graph.
Chapter7: Perefect Competition
Section: Chapter Questions
Problem 4SQP
Related questions
Question
average revenue (AR) are thus both equal to the market price.
The situation in which a firm makes an economic profit is identified as one of the possible short-run positions of a firm under perfect competition.
Illustrate the given short-run position and explain the situation with reference to your graph.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
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: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:
9781337794992
Author:
William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:
Cengage Learning
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc