Question 2 - Competitive Markets
Given the following graphs and information, answer the following questions:
(a) How many firms are supplying the market?
(b) What are the revenues, profits, and costs for the entire market and an individual firm? Make sure to show your work and method.
(c) How can you tell that the market is perfectly competitive? Use the information in the graph to assist you.
(d) In the long run (LR), what would you expect to happen to profit levels? Explain.
Market
Firm
P
MC
Graphically:
D
Q*
(a) How many firms are supplying the market?
(b) What are the revenues, profits, and costs for the entire market and an individual firm? Make sure to show your work and method.
(c) How can you tell that the market is perfectly competitive? Use the information in the graph to assist you.
(d) In the long run (LR), what would you expect to happen to profit levels? Explain.