For a competitive firm, explain the difference between shutdown and exit. Explain the meanings, conditions, and provide graphics is necessary.
A competitive firm sets P=MC for profit maximization
The shutdown point for the competitive firm is given by where the Average variable cost is minimum.IF the price is less than the minimum AVC,then the firm will choose to not produce and shut down in order to minimize its losses in the short run.When the firm shuts down,it still incurs fixed cost and so its losses are equal to its fixed cost.
On the other hand,a firm exits the market if it is unable to make economic in the long run.In the long run,the competitive firm enjoys free entry and exit.So, the loss making firms will choose to exit the market in the long run,if the price doesn't increase.In the long run,when the firm exits the market then it does not incur its fixed cost as losses.
For a competitive firm, explain the difference between shutdown and exit. Explain the meanings, conditions, and...
S In the context of a perfectly competitive industry, clearly explain the difference between "shutdown" and "exit". Explain whether these two phenomena take place in the short-run or long-run and also describe the price-cost relationship (i.e. connection between market price and AVC, AFC, and ATC) necessary for "shutdown" and for "exit" Minn
Entry and Exit: What is the shutdown point? In what conditions is continuing to operate at a loss preferable to shutting down?
Explain the difference between the demand curve faced by individual firm in a purely competitive market and the demand curve faced by the industry. Use examples if possible
1) List the five characteristics of monopolistic competitive market. 2) Explain the difference between a monopoly and a monopolistic competitive market. 3) How are they similar, and how are they different? 4) Describe the demand curve facing a monopolistic competitive market and how it differs from that facing a firm in a purely competitive market. 5) How can a firm be able to sustain itself while differentiating itself from its competitors?
Shutdown Price We have the following information for a competitive fim: Quantity Vaiable Cost Fixed Cost 14 18 21 25 10 10 10 10 Part A: What is the marginal cost at each quantity supplied? (The variable cost in the table above is the total variable cost. The marginal cost is the difference in total variable cost between N and N-1 units. Note that the marginal cost curve is U-shaped: It is high at Q 1 andQ 8, and it...
Question 3 (a) Explain the three conditions held at the long-run equilibrium in a perfectly competitive market with a diagram. (10 marks) (b) If a firm makes zero economic profit, it will exit the market in the long run. Do you agree? Explain. (7 marks) (c) What makes a firm become a natural monopolist, and how does it become a barrier to entry of new firms? Explain. (8 marks)
What is the difference between a firm’s shutdown point in the short run and in the long run? Why are firms willing to accept losses in the short run but not in the long run?
a) Explain the connection between marginal , slope, and derivative. b) Give the conditions for competitive and perfectly competitive markets c) What is an example of how you use a "model" in everyday life?
A big difference between a competitive firm and a monopolist is that a monopolist 1. does not try to maximize profits. 2. cannot set its price at the market price. 3. does not charge a price equal to marginal revenue. 4. does not set marginal revenue equal to marginal cost to maximize profits. 5. can always make positive economic profits.
1) What are the requirements for perfect competition? 2) Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point. 3) In the long run, perfectly competitive firms cannot make an economic profit. Why? 4) Describe how economic losses are eliminated in a perfectly competitive industry.