3. Consider a firm operating in a perfectly competitive market. Answer the following questions as they pertain to this firm. a) Explain with the aid of diagrams why the SR supply curve is equal to MC above minimum AVC. b) How does the firm determine the price it charges? Show this graphically. c) What possible outcomes can be realized in terms of the profit situation after price has been set. Show each of these graphically.

3. Consider a firm operating in a perfectly competitive market. Answer the following questions as they pertain to this firm. a) Explain with the aid of diagrams why the SR supply curve is equal to MC above minimum AVC. b) How does the firm determine the price it charges? Show this graphically. c) What possible outcomes can be realized in terms of the profit situation after price has been set. Show each of these graphically.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 1SCQ: Firms ill a perfectly competitive market are said to be price takers that is, once the market...

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