Question

1. A single firm in a perfectly competitive market is a price taker? True or False. Explain with examples. 2. What is the supply curve of a perfectly competitive firm? Is it different from that of the market supply curve? Explain. 3.If a firm makes a loss in the short run, then it would shut down? If no, discuss. If yes, discuss.Offer examples 4. Does the monopolist have a supply curve? Discuss

Answer 1

1)

Answer: True statement.

price in a perfectly competitive market is decided by the demand and supply forces in the market. A firm is a price taker in the market.

2)

MC is considered as the supply curve of the firm in a perfectly competitive market.

A market supply curve is the horizontal summation of the individual firm's MC.

3)

The firm should not shut down its production facility as long as it is able to recover the Average variable cost. The firm can bear the loss of fixed cost in the short-run but it can not bear the loss of variable cost.

4)

The monopolist does not have supply curve, firm can sell same level of output at different prices and different levels of output at the same price.