Understand the key concepts of pure competition in the short run, including cost analysis, profit or loss
Question:
Understand the key concepts of pure competition in the short run, including cost analysis, profit or loss determination, shutdown decisions, supply curve behavior, and market entry/exit dynamics.
1. Define and explain the characteristics of a perfectly competitive market. Provide real-world examples to illustrate these characteristics.2. Suppose a firm in a perfectly competitive market has the following cost structure:
- Total Fixed Costs (TFC) = $1,000
- Variable Costs (VC) = $50 per unit
- Market price (P) = $80 per unit
- Current production quantity (Q) = 100 units
a. Calculate the firm's total cost (TC) and average total cost (ATC) at the current production level.
b) Determine the firm's total profit or loss in the short run at the current production level. Explain whether the firm should continue to produce in the short run.
3. Discuss the conditions under which a perfectly competitive firm should shut down in the short run. Using the information from Question 2, determine whether the firm should shut down in the short run and explain why or why not.
4. Explain how the individual firm's short-run supply curve in a perfectly competitive market is determined. Use the firm's cost and revenue data provided in Question 2 to illustrate the firm's supply curve.
5. Discuss what will happen in the short run if firms in a perfectly competitive market are earning economic profits. Will new firms enter the market or existing firms exit? Explain your reasoning.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr