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. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer. State the condition for a consumer's utility maximizing choice and illustrate graphically. 2. Consider the following table of long-run total costs for three different firms: Quantity Total Cost ($) Firm A Firm B Firm C 1 60 11 21 2 70 24 34 3 80 39 49 4 90 56 66 5 100 75 85 6 110 96 106 7 120 119 129 Does each of these firms experience economies of scale or diseconomies of scale? Explain your answer with necessary calculations.

Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer.State the condition for a consumer's utility maximizing choice and illustrate graphically.

1. Riaz has a limited income and consumes only Apple and Bread. His current consumption choice is 3 apples and 5 bread. The price of apple is $3 each, and the price of bread is $2.5 each. The last apple added 5 units to Sadid's utility, while the last bread added 7 units. Is Riaz making the utility-maximizing choice? Why or why not? Do you suggest any adjustment in Riaz's consumption bundle? Why or why not? Give reasons in support of your answer. State the condition for a consumer's utility maximizing choice and illustrate graphically.

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.

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 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.

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

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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