Chapter 8: Q13 (page 211)
What is a “price taker” firm?
A price taker firm is the firm that charges price determined by the market.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
If new technology in a perfectly competitive market brings about a substantial reduction in costs of production, how will this affect the market?
What two rules does a perfectly competitive firm apply to determine its profit-maximizing quantity of output?
The AAA Aquarium Co. sells aquariums for \(20 each. Fixed costs of production are \)20. The total variable costs are \(20 for one aquarium, \)25 for two units, \(35 for the three units, \)50 for four units, and $80 for five units. In the form of a table, calculate total revenue, marginal revenue, total cost, and marginal cost for each output level (one to five units). What is the profit-maximizing quantity of output? On one diagram, sketch the total revenue and total cost curves. On another diagram, sketch the marginal revenue and marginal cost curves.
Assuming that the market for cigarettes is in perfect competition, what does allocative and productive efficiency imply in this case? What does it not imply?
Explain how the profit-maximizing rule of setting P = MC leads a perfectly competitive market to be allocatively efficient.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
