Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 13, Problem 3QAP

(a)

To determine

Percentage of total production from a perfectly competitive market.

(b)

To determine

Reason to spend much time for perfect competition in text.

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George​ Stigler, "Perfect​ Competition, Historically​ Contemplated," Journal of Political Economy​,Vol.​ 55, No.​ 1, (February​ 1957), pp.​ 1-17.   Despite the fact that few firms sell identical products in markets where there are no barriers to​ entry, economists believe that the model of perfect competition is important because     A. economists prefer studying theoretical markets instead of actual markets.   B. all markets eventually become perfectly competitive.   C. it is a benchmark—a market with the maximum possible competition—that economists use to evaluate actual markets that are not perfectly competitive.   D. this is the type of market that our business laws protect and promote.
Juan makes dining room chairs in a perfectly competitive industry. He is looking for economic advice and tells you the following data about his business. (Assume cost curves have their standard shapes.) Total revenue is $120,000, Total fixed costs are $100,000 Total variable costs are $110,000 Marginal cost is $200/unit Quantity produced is 600 units What will you suggest to Juan? A: Shut down immediately B: Do not shut down and increase production C: Do not shut down but decrease production D: Do not shut down and do not change the current production level.
“In a perfectly competitive market, firms always operate at the lowest per-unit cost." Is the preceding statement true or false? Explain your answer.
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