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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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Section
BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 24, Problem 15E
Textbook Problem
1 views

Use the model of perfect competition to explain the rise in corn prices from $1 per unit in 2004 to $6 per unit in 2011.

To determine

To explain:

The reasons for rise in corn prices from $1 per unit in 2004 to $6 per unit in 2011.

Explanation of Solution

Perfectly competitive market structure is one where large number of buyers and sellers exist. Other features of perfect competition are:

  1. Homogeneous products
  2. Industry is the price maker
  3. Firm is the price taker
  4. No individual buyer or seller can influence industry price
  5. Demand curve is AR curve which means P=AR=MR

Under perfect competition, at the equilibrium, the price is equal to marginal cost...

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