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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

The table nearby represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in the area is $10. Total costs include all opportunity costs. Fixed costs equal zero.

a. Calculate the total revenue and total economic profit for this pizza shop at each rate of output.

b. Assuming that the pizza shop always produces and sells at least one pizza per hour, does this appear to be a situation of short-run or long-run equilibrium?

c. Calculate the pizza shop's marginal cost and marginal revenue at each rate of output. Based on marginal analysis, what is the profit maximizing rate of output for the pizza shop?

d. Draw a diagram depicting the short-run marginal revenue and marginal cost curves for this pizza shop, and illustrate the determination of its profit-maximizing output rate.

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.

Why would a number of plastic-recycling firms continue to operate even though the market clearing price of recycled plastic is lower than their break-even price?

Suppose that the firm with the costs and revenues tabulated in Figure 23-2 is contemplating whether to produce 12 units of output. If it were to produce this many units, what (if anything) would happen to the market price? What would be the firm's marginal revenue for the 12th unit produced? What would be the firm's total revenues per hour?

If the government were to decide to limit the number of propane distributors to a handful of firms, would the propane-distribution industry still satisfy the characteristics of perfect competition? Explain.
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