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?

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Answer 1

Textbook Question

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

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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16:10 ← BEC 3701 - Assignments-... KWAME NKRUMAH UNIVERSITY TEACHING FOR EXCELLENCE SCHOOL OF BUSINESS STUDIES DEPARTMENT OF ECONOMICS AND FINANCE ADVANCED MICRO-ECONOMICS (BEC 3701) Assignments INSTRUCTIONS: Check instructions below: LTE 1) Let u(q1,q2) = ln q₁ + q2 be the (direct) utility function, where q₁ and q2the two goods. Denote P₁ and P2 as the prices of those two goods and let M be per period money income. Derive each of the following: a) the ordinary or Marshallian demand functions q₁ = d₂ (P₁, P₂, M) for i = 1,2 [3 Marks] b) the compensated or Hicksian demand functions q₁ = h₂ (P₁, P2, M) for i = 1,2 [3 Marks] c) the Indirect Utility Function uº = v(P₁, P2, M) [3 Marks] d) the Expenditure Function E(P1, P2, U°) [3 Marks] e) Draw a diagram of the solution. There should be two graphs, one above the other; the first containing the indifference curves and budget constraint that characterize the solution to the consumer's choice problem; the second characterizing the demand…

Answer 2

Textbook Question

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

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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Answer 3

Textbook Question

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

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

Answer 4

Textbook Question

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

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

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

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.

Answer 8

Expert Solution & Answer

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.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

To determine

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

Answer 12

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.

Answer 13

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.

Answer 14

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