Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
Textbook Question
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Chapter 8, Problem 1SCQ

Firms ill a perfectly competitive market are said to be “price takers” that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

Expert Solution & Answer
Check Mark
To determine

Why all the firms are considered as price takers in a perfectly competitive market.

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 the demand falls, only a price fall will lead to increase in demand for the market to fix itself. All the firms are considered to be “price takers” because, all the buyers and sellers have all the information there is and as there are a 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 a lower price and the firm that increased the price will have no buyers at all.

If you are a seller in a perfectly competitive market, and you are unhappy with the price, you would not raise the price, not even by a cent because you will know that if you increase the price even by a cent, all the buyers will shift to the other sellers as they know that they will be getting the exact same product at a lower cost.

Economics Concept Introduction

Concept introduction:

Perfect Competition- It refers to that market condition where there are a large number of buyers and sellers, who have perfect knowledge about the market, and there is existence of homogeneity in the commodities and all the firms are price takers.

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Chapter 8 Solutions

Principles of Economics 2e

Ch. 8 - A single firm in a perfectly competitive market is...Ch. 8 - What are the four basic assumptions of perfect...Ch. 8 - What is a price taker firm?Ch. 8 - How does a perfectly competitive firm decide what...Ch. 8 - What prevents a perfectly competitive firm from...Ch. 8 - How does a perfectly competitive film calculate...Ch. 8 - Briefly explain the reason for the shape of a...Ch. 8 - What two rules does a perfectly competitive firm...Ch. 8 - How does the average cost curve help to show...Ch. 8 - What two lines on a cost curve diagram intersect...Ch. 8 - Should a firm shut down immediately if it is...Ch. 8 - How does the average variable cost curve help a...Ch. 8 - What two lines on a cost curve diagram intersect...Ch. 8 - Why does entry occur?Ch. 8 - Why does exit occur?Ch. 8 - Do entry and exit occur in the short run, the long...Ch. 8 - What price will a perfectly competitive firm end...Ch. 8 - Will a perfectly competitive market display...Ch. 8 - Will a perfectly competitive market display...Ch. 8 - Finding a life partner is a complicated process...Ch. 8 - Can you name five examples of perfectly...Ch. 8 - Your company operates in a perfectly competitive...Ch. 8 - Since a perfectly competitive firm can sell as...Ch. 8 - Many films in the United States file for...Ch. 8 - Why will profits for films in a perfectly...Ch. 8 - Why will losses for firms in a perfectly...Ch. 8 - Assuming that the market for cigarettes is in...Ch. 8 - In the argument for why perfect competition is...Ch. 8 - The AAA Aquarium Co. sells aquariums for 20 each....Ch. 8 - Perfectly competitive firm Doggies Paradise Inc....Ch. 8 - A computer company produces affordable,...
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