Reason for why the perfectly competitive buyers and sellers are price takers.

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Answer 1

Question

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

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1. Case 0) Baseline case Table 1: Power Plant Capacity and Marginal Cost: Case 0 Plant # Energy Source Capacity (MW) MC (S/MWh) 1 Coal 300 45 2 Oil 100 90 3 4 Natural Gas Nuclear 500 50 600 0 (a) Calculate the capacity mix of this market by energy source. (b) Draw a supply curve of this wholesale generation market. Table 2 below shows the demand levels for selected hours of a representative day. We will consider only these four hourly markets for our analysis. Note that the 6 PM demand is the highest demand level of the day. Table 2: Hourly Demand (selected hours) Hour Demand (MWh) 4 AM 500 10 AM 700 2 PM 800 6 PM 1000 (c) Find the market clearing prices and calculate how much electricity each power plant generates in the hourly market (4AM, 10AM, 2PM, and 6PM). (d) Find the average price of electricity (by taking a simple average of hourly prices; [P(4am) + P(10AM) + P(2PM) + P(6PM)]/4).

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Answer 2

Question

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

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Answer 3

Question

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

Want to see more full solutions like this?

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Answer 4

Question

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

Answer 6

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

Answer 7

Chapter 13, Problem 1QE

To determine

Reason for why the perfectly competitive buyers and sellers are price takers.

Answer 8

Expert Solution & Answer

Explanation of Solution

Market equilibrium in a perfectly competitive market is attained with the forces of demand and supply. When the price is too high, the demand falls and when demand falls, only a price fall will lead to increase in demand for the market to fix itself. Perfectly competitive buyers and sellers are price takers because all the buyers and sellers have all the information and as there are large number of buyers and sellers dealing with homogeneous products, there will not be a single firm that can influence the price. If a firm increases the price, the buyers know that there are other sellers selling at the lower price and the firm that increased the price will have no buyers at all.

On the seller side, even though the price is low, he will not increase the price because when price increases, all the buyers will shift to the other sellers, as they know that they will be getting the same product at a low cost.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Perfect competition: Perfect competition is a market structure where there are large number of buyers and sellers in the market selling the identical products.

Answer 12

Ch. 13.1 - Prob. 1Q Ch. 13.1 - Prob. 2Q Ch. 13.1 - Prob. 3Q Ch. 13.1 - Prob. 4Q Ch. 13.1 - Prob. 5Q Ch. 13.1 - Prob. 6Q Ch. 13.1 - Prob. 7Q Ch. 13.1 - Prob. 8Q Ch. 13.1 - Prob. 9Q Ch. 13.1 - Prob. 10Q

Reason for why the perfectly competitive buyers and sellers are price takers.

Reason for why the perfectly competitive buyers and sellers are price takers.

Explanation of Solution

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Chapter 13 Solutions