Perfect competition and why economists consider it to be an important benchmark. Concept Introduction: Perfect competition: Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

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Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

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Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

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Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

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Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

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Answer 5

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

Answer 6

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

Answer 7

Chapter 12, Problem aWYWL

To determine

To define:

Perfect competition and why economists consider it to be an important benchmark.

Concept Introduction:

Perfect competition:

Perfect competition is a market structure where competition is at its greatest possible level. It has a large number of buyers and sellers, each firm produces a homogenous product, there is free entry and exit of firms, and absolutely there is no advertisement cost.

Answer 8

Expert Solution & Answer

Explanation of Solution

Perfect competition is considered by economists as a bench for three reasons.

Allocative efficiency:

In both short-run and long-run, price is equal to the marginal cost and thus allocative efficiency is achieved. Moreover, at this price, the consumer and producer surplus are maximized.

Productive efficiency:

This occurs when the equilibrium output is supplied at a minimum average cost and this is attained in the long-run for a competitive market.

Economic efficiency:

The long-run of perfect competition exhibits optimal level of economic efficiency, and for this to be achieved, all of the conditions of perfection competition must hold true.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 12 - Prob. aWYWL Ch. 12 - Prob. bWYWL Ch. 12 - Prob. cWYWL Ch. 12 - Prob. dWYWL Ch. 12 - Prob. eWYWL Ch. 12 - Prob. fWYWL Ch. 12 - Prob. 1QFT Ch. 12 - Prob. 2QFT Ch. 12 - Prob. 3QFT Ch. 12 - Prob. 1P

Explanation of Solution

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Chapter 12 Solutions