question
Perfect competition is a market structure with
answer
price taking firms
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he demand curve for a perfectly competitive firm is
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infinitley elastic
question
A perfectly competitive firm maximizes profits by picking output where
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P=MC
question
A firm with a total revenue TR = 4Q ____ perfectly competitive.
answer
P=4
question
In the long run, perfectly competitive firms earn ____ economic profit
answer
0
question
A firm in a competitive industry has a total cost function of TC = 0.2Q² +5Q + 30, whose corresponding marginal cost curve is MC = 0.4Q + 5. If thefirm faces a price of 7, what quantity should it sell?
answer
Q=5
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And what profit does the firm make at this price?
answer
-25
question
And should the firm shut down?
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And should the firm shut down? Not in the short run but yes shutdown in the long run. In the short run the loss of 25 is better thanlosing fixed cost of 30 if were to produce nothing. In the long run, allcosts are variable so can achieve zero profit by shutting down in thelong run.
question
And if the firm instead faces a price of 9, what quantity should it sell?
answer
10
question
And what profit does the firm make at the new higher price?
answer
-10
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