Homework Answers
(a) In perfect competition, all firms are very small and none of them can influence market price. So existence of one price making firm makes the industry imperfectly competitive.
(b) In perfect competition, each firm produces identical product. So existence of product differentiation makes the industry imperfectly competitive.
(c) In perfect competition, market clears without government intervention, and entry is free without any entry barriers. So government imposed barrier on maximum number of cabs makes the industry imperfectly competitive.
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3. (10 points) Please explain why each of the following is NOT a perfectly competitive industry...
Explain why each of the following examples is not a perfectly competitive industry. One firm produces...
Explain why each of the following examples is not a perfectly competitive industry. One firm produces a large portion of the industry’s total output, but there are many firms in the industry, and their products are indistinguishable. Firms can easily exit and enter the industry. There are many buyers and sellers in the industry. Consumers have equal information about the prices of firms’ products, which differ moderately in quality from firm to firm. Many taxicabs compete in a city. The...
Explain why each of the following examples is not a perfectly competitive industry. One firm produces...
Explain why each of the following examples is not a perfectly competitive industry. One firm produces a large portion of the industry’s total output, but there are many firms in the industry, and their products are indistinguishable. Firms can easily exit and enter the industry. There are many buyers and sellers in the industry. Consumers have equal information about the prices of firms’ products, which differ moderately in quality from firm to firm. Many taxicabs compete in a city. The...
Consider a perfectly competitive industry, which consists of many identical firms; all of them characterized by...
Consider a perfectly competitive industry, which consists of many identical firms; all of them characterized by the following long run average and marginal cost curves: LATC = 2400-30Q+0.3Q^2 and LMC = 2400-60Q+0.9Q^2 a. In the long run equilibrium, how much will each firm produce? b. What will be the long run equilibrium price? c. What is the profit of each individual firm in this case? Briefly explain why.
6. Consider a perfectly competitive industry, which consists of many identical firms -all of them characterized...
6. Consider a perfectly competitive industry, which consists of many identical firms -all of them characterized by the following long run average and marginal cost curves: LATC = 2400 – 300 + 0.32 and LMC = 2400 – 600 + 0.902. a. In the long run equilibrium, how much will each firm produce? b. What will be the long run equilibrium price? c. What is the profit of each individual firm in this case? Briefly explain why.
TU) UdlIT IS. In a perfectly competitive market: each firm produces a unique product and chooses a price that maximize...
TU) UdlIT IS. In a perfectly competitive market: each firm produces a unique product and chooses a price that maximize there are very few firms, and each controls a large segment of the market. entry into the industry is restricted in the long run. there are many relatively small firms, and each firm is a price-taker. c. t If a firm is a price-taker, it: sells its product at the price determined by the market. sells its product at the...
1. Characteristics of competitive markets The model of competitive markets relies on the following four core assumptions:
1. Characteristics of competitive markets The model of competitive markets relies on the following four core assumptions: 1. There must be many buyers and sellers, none of which is large in relation to total sales or purchases. In other words, a few players can't dominate the entire market. 2. Each firm produces and seills a homogeneous product that is indistinguishable from all other firms' products in a given industry. That is, buyers must regard all sellers" products as equivalent, or identical. 3. Buyers and...
How to do this question ? B2-(13 MARKS) Consider a perfectly competitive industry in which each...
How to do this question ?
B2-(13 MARKS) Consider a perfectly competitive industry in which each firm i has a total cost function given by the equation: TC,- 128+ 4q+ 2q. Further, assume that the industry demand finction is given by the following: P = 84-20 a) Describe the long nun market equilibrium. That is, identify the equilibrium price and quantity output for each firm, the number of fims in the industry and the level of producer and consumer surplus....
1. Characteristics of competitive markets The model of perfectly competitive markets relies on these four core...
1. Characteristics of competitive markets The model of perfectly competitive markets relies on these four core assumptions: 1. There must be numerous small firms and customers-each player's actions have no effect on price and, thus, trade associations and collusive agreements are not possible. 2. Firms must produce a homogenous product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing for free entry into and exit from the industry. 4. Each firm and each...
Characteristics of competitive markets The model of competitive markets relies on these three core assumptions:
1. Characteristics of competitive markets The model of competitive markets relies on these three core assumptions: 1. There must be many buyers and sellers-a few players can't dominate the market. 2. Firms must produce an identical product-buyers must regard all sellers products as equivalent. 3. Firms and resources must be fully mobile, allowing free entry into and exit from the industry. The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for...
1. (20p) Suppose that, in a perfectly competitive industry, the technology for making the product (by...
1. (20p) Suppose that, in a perfectly competitive industry, the technology for making the product (by any single firm) has the total cost function c(q) = 200 + 4q+ Barriers to entry and exit the market are low and an unlimited number of firms could enter this industry, all with the same total cost function. (a) Compute the long-run equilibrium price in this industry, as well as the amount of output each firm would produce at this price. Explain the...
Consider a perfectly competitive industry, which consists of many identical firms; all of them characterized by the following long run average and marginal cost curves: LATC = 2400-30Q+0.3Q^2 and LMC = 2400-60Q+0.9Q^2 a. In the long run equilibrium, how much will each firm produce? b. What will be the long run equilibrium price? c. What is the profit of each individual firm in this case? Briefly explain why.
6. Consider a perfectly competitive industry, which consists of many identical firms -all of them characterized by the following long run average and marginal cost curves: LATC = 2400 – 300 + 0.32 and LMC = 2400 – 600 + 0.902. a. In the long run equilibrium, how much will each firm produce? b. What will be the long run equilibrium price? c. What is the profit of each individual firm in this case? Briefly explain why.
TU) UdlIT IS. In a perfectly competitive market: each firm produces a unique product and chooses a price that maximize there are very few firms, and each controls a large segment of the market. entry into the industry is restricted in the long run. there are many relatively small firms, and each firm is a price-taker. c. t If a firm is a price-taker, it: sells its product at the price determined by the market. sells its product at the...
How to do this question ?
B2-(13 MARKS) Consider a perfectly competitive industry in which each firm i has a total cost function given by the equation: TC,- 128+ 4q+ 2q. Further, assume that the industry demand finction is given by the following: P = 84-20 a) Describe the long nun market equilibrium. That is, identify the equilibrium price and quantity output for each firm, the number of fims in the industry and the level of producer and consumer surplus....
1. Characteristics of competitive markets The model of perfectly competitive markets relies on these four core assumptions: 1. There must be numerous small firms and customers-each player's actions have no effect on price and, thus, trade associations and collusive agreements are not possible. 2. Firms must produce a homogenous product-buyers must regard all sellers' products as equivalent. 3. Firms and resources must be fully mobile, allowing for free entry into and exit from the industry. 4. Each firm and each...
1. (20p) Suppose that, in a perfectly competitive industry, the technology for making the product (by any single firm) has the total cost function c(q) = 200 + 4q+ Barriers to entry and exit the market are low and an unlimited number of firms could enter this industry, all with the same total cost function. (a) Compute the long-run equilibrium price in this industry, as well as the amount of output each firm would produce at this price. Explain the...
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