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2. Show and explain the equilibrium in the short run for a perfectly competitive firm. Why equilibrium occurs at point MC=MR?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 5.9P

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2. Show and explain the equilibrium in the short run for a perfectly competitive firm. Why equilibrium
occurs at point MC=MR?

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Since a perfectly competitive firm can sell as much as it wishes at the market price, why can the firm not simply increase its profits by selling an extremely high quantity?
A firm is selling apples is profit-maximizing, but they're in a constant cost industry. The industry is perfectly competitive and currently in long-run equilibrium. Assume apples are a normal good and consumer income falls, and the firm continues to produce. 1. Illustrate the decrease in income in the short run with a cost curves graph. Make sure to highlight the area of loss.
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10. Figure 5 shows the graph of the short-run cost curves for Tim-T-Shirts, a firm operating in a perfectly competitive market. P* denotes the current price for Tim T-Shirts. Based on the information in the graph, which of the following should we expect in the long run? a) New firms will enter the market. b) The number of firms in the market will remain unchanged. c) Gray Sweaters will increase the current price of sweaters. d) There is not enough information to answer the question. Figure 5 Price and Costs P* MC ATC AVC Quantity
(b) In the long-run equilibrium, all firms in a perfectly competitive market earn zero economic profit. Explain why this is true using intuition and graphs.
08. Which of the following holds for a perfectly competitive firm that is in long-run competitive equilibrium?
. The market for fertilizer is perfectly competitive. Firms in the market are producing output, but they are currently making economic losses. a) How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer?b) Draw a graph, illustrating the present situation for the typical firm that is making losses.c) Assuming there is no change in demand or the firm's cost curves, explain what will happen in the long run to the price of fertilizer, marginal cost, average total cost, the quantity supplied by each firm, and the total quantity supplied to the market
choose 1 if, for the last unit of a good produced by a perfectly competitive firm, MR>MC, then in producing it the firm: 1- added more to total revenue than it added to total costs 2-is maximizing marginal profit 3-has minimized its losses 4-added more to total costs than it added to total revenue
B please
Looking to see how to resolve
3. Suppose a perfectly competitive firm is operating at a level of output such that P> MC. Would you advise this firm to keep producing at this level or should it increase or decrease its output? Why? (Hint: it will help you to draw a graph for a perfectly competitive firm in short run equilibrium. The level of profit in equilibrium does not matter).