QUESTION 5: Why is a perfectly competitive firm said to be a price taker? a. It faces a downward-sloping market demand curve. b. It produces a good that is not produced by any other firm in the market. c. The firm's individual production is insignificant relative to the production in the industry. d. The firm's marginal revenue curve is downward sloping. e. There are no barriers to the entry of new firms in the industry.
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Step 1: In a perfectly competitive market, there are many buyers and sellers, with each seller being small and not having any market power. Show more…
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A price-taking firm can exert no control over price because: a. the firm's demand curve is downward sloping. b. of a lack of substitutes for the product. c. the firm's individual production is insignificant relative to production in the industry. d. many other firms produce a product that is nearly identical to its product. e. both c and d.
Himani S.
A perfectly competitive firm has the following short-run total cost: $$ \begin{array}{c|c} \text { Quantity } & \text { TC } \\ \hline 0 & \$ 5 \\ 1 & 10 \\ 2 & 13 \\ 3 & 18 \\ 4 & 25 \\ 5 & 34 \\ 6 & 45 \end{array} $$ Market demand for the firm's product is given by the following market demand schedule: $$ \begin{array}{c|c} \text { Price } & \text { Quantity demanded } \\ \$ 12 & 300 \\ 10 & 500 \\ 8 & 800 \\ 6 & 1,200 \\ 4 & 1,800 \end{array} $$ a. Calculate this firm's marginal cost and, for all output levels except zero, the firm's average variable cost and average total cost. b. There are 100 firms in this industry that all have costs identical to those of this firm. Draw the shortrun industry supply curve. In the same diagram, draw the market demand curve. c. What is the market price, and how much profit will each firm make?
KEY QUESTION At the bottom of the page, complete the labor demand table for a firm that is hiring labor competitively and selling its product in a competitive market. LO2 a. How many workers will the firm hire if the market wage rate is $$ 27.95 ?$$ S19.95? Fxplain why the firm will not hire a larger or smaller number of units of labor at each of these wage rates. b. Show in schedule form and graphically the labor demand curve of this firm. c. Now again determine the firm's demand curve for labor, assuming that it is selling in an imperfectly competitive market and that, although it can sell 17 units at $$ 2.20$$ per unit, it must lower product price by 5 cents in order to sell the marginal product of each successive labor unit. Compare this demand curve with that derived in question $2 b .$ Which curve is more elastic? Explain.
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