3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case...

 

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3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case where the firm is facing P = MC = SRATC = LRATC by using the following diagram. In this diagram, you should include demand curve (d), marginal cost curve (MC), short run average total cost curve (SRATC), and long run average total cost curve (LRATC). Remember to label all axes. (2 points) b. Does the firm exhibit productive efficiency? Explain why? (2 points) c. Do you expect firms will enter / exit the industry in long run? Explain why? (2 points) d. Suppose the market demand rises because of population growth in the country. The market price rises above the LRATC. What do you expect to happen to the market supply? What should happen to the long-run competitive price if this is a decreasing cost industry? (2 points) 3. Perfect Competition Market (Total 8 points) a. For a perfectly competitive firm, illustrate a case where the firm is facing P = MC = SRATC = LRATC by using the following diagram. In this diagram, you should include demand curve (d), marginal cost curve (MC), short run average total cost curve (SRATC), and long run average total cost curve (LRATC). Remember to label all axes. (2 points) b. Does the firm exhibit productive efficiency? Explain why? (2 points) c. Do you expect firms will enter / exit the industry in long run? Explain why? (2 points) d. Suppose the market demand rises because of population growth in the country. The market price rises above the LRATC. What do you expect to happen to the market supply? What should happen to the long-run competitive price if this is a decreasing cost industry? (2 points)

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It appears to show a perfectly competitive market and asks four questions about it Heres what I can tell you a Perfectly Competitive Market Diagram Th... View the full answer