Assuming a perfect competition market exists: a) State the profit maximizing condition for each firm in the industry. b) Graphically, show the market equilibrium of the industry and a representative individual firm where economic profits equal zero. Please include marginal revenues, demand curve, price and quantity at the equilibrium. c) From part b above, if the number of consumers increases, show the change in the industry and the individual firm. As results, what do you expect other changes in the industry and the individual firm in a longer term

Assuming a perfect competition market exists: a) State the profit maximizing condition for each firm in the industry. b) Graphically, show the market equilibrium of the industry and a representative individual firm where economic profits equal zero. Please include marginal revenues, demand curve, price and quantity at the equilibrium. c) From part b above, if the number of consumers increases, show the change in the industry and the individual firm. As results, what do you expect other changes in the industry and the individual firm in a longer term

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.4P

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Question

: Assuming a perfect competition market exists:

a) State the profit maximizing condition for each firm in the industry.

b) Graphically, show the market equilibrium of the industry and a representative individual firm where economic profits equal zero. Please include marginal revenues, demand curve, price and quantity at the equilibrium.

c) From part b above, if the number of consumers increases, show the change in the industry and the individual firm. As results, what do you expect other changes in the industry and the individual firm in a longer term?

Defintion Defintion Curve that represents the graphical relationship between the total supply of goods and services and the price level in the economy. When the price level increases, producers tend to supply more of a product in the market to earn a higher revenue or vice versa.

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