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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 the information provided in Problem 23-4. Suppose the market price drops to only $5 per pizza. In the short run, should this pizza shop continue to make pizzas, or will it maximize its economic profits (that is, minimize its economic loss) by shutting down?

Consider a market for online movie rentals. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. Consider each of the following events, and discuss the effects they will have on the market clearing price and on the demand curve faced by the individual online rental firm.

a. Peoples tastes change in favor of going to see more movies at cinemas with their friends and Family members.

b. More online movie-rental firms enter the market.

c. There is a significant increase in the price to consumers of Purchasing movies online.

Consider Figure 23-8. Why does the output rate in panel (b) remain atqe units per hour even if the position of the AC curve shifts from AC1toAC3following an increase in fixed costs, and how do we know that economic profits then become negative?

Why might daily variations in the market clearing price of recycled plastic induce some firms to call in their workers and pay them wages for their labor services on some days but tell them to stay home on others?

Take a look at Figure 23-3. This figure uses the data in the table from Figure 23-2, which indicates that the area of the blue rectangle displaying hourly economic profits is $5 per period. What prevents this firm from continuing to produce the same number of units per hour but raising the price that it charges for each unit in order to enlarge the area of the profit rectangle?
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