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Chapter 23: Q. 23.4LO (page 510)

Explain how the equilibrium price is determined in a perfectly competitive market

Short Answer

Expert verified

The market cost price is bigger than orcapable the minimum AVC.

Step by step solution

01

Introduction

When organizations in either a totally tight world with either a given handful of companies work as in short term at least, or the maximum prices are influenced by that of the meeting of both the industry aggregate supply.

02

Given Information

Help in estimating the company's extended supply profile. They separate the reasoning as two segments by partitioning every quick arc.

03

Explanation

So when current expense becomes approximately equal to same lowest (long-run) Dc, then must evaluate a firm's money production amount. help in estimating the startup's dire straits arc These argument will be split into two parts. Because when current expense cost is greater than the able of both the lowest AVC, next evaluate the firm's money product amount.

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Most popular questions from this chapter

Consider Figure 23-8. Why does the output rate in panel (b) remain at $q_{e}$ units per hour even if the position of the AC curve shifts from $A C_{1}$ to $A C_{3}$ following an increase in fixed costs, and how do we know that economic profits then become negative?

Consider Figure 23-5, and suppose that the price per unit corresponding to the position of d1 is at $4.50 per unit and that the quantity at point E1 is exactly 7 units per hour. Calculate total revenues, total costs, and economic profits at point E1 and explain why it is called the short-run break-even point.

Why might firms that hire mostly untrustworthy people struggle to provide as much output in a competitive market as firms that attract and retain mostly honest individuals?

Consider the diagram nearby, which applies to a perfectly competitive firm, which at present faces a market clearing price of $\(20$ per unit and produces $10, 000$ units of output per week.

a. What is the firm's current average revenue per unit?

b. What are the present economic profits of this firm? Is the firm maximizing economic profits? Explain.

c. If the market clearing price drops to $\) 12.50$ per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic losses)? Explain.

d. If the market clearing price drops to $$ 7.50$ per unit, should this firm continue to produce in the short run if it wishes to maximize its economic profits (or minimize its economic loses)? Explain.

The minimum feasible long-run average cost for firms in a perfectly competitive industry is $$ 40$ per unit. If every firm in the industry currently is producing an output consistent with a long-run equilibrium, what is the marginal cost incurred by each firm? What is the market price?

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