1) It is suggested that perfectly competitive firms are price takers. Although one rarely, if ever, has an opportunity to test this in the real-world, it is equally rare that the customer goes into any business establishment and tells the seller what the price is. If sellers are price takers and buyers don't dictate price, where does price come from in perfectly competitive markets? Explain
2. The following table shows the total cost for a product of perfectly competitive firm that sells for $20 per unit. (4 points)
Q TC MC MR TFC TVC ATC AVC
0 30
1 55
2 75
3 85
4 100
5 120
6 145
7 185
a. Complete the table above
3) In the short-run , information about a perfectly competitive firm's fixed costs are needed to determine both, the profit maximizing level of output and the amount of profit earned when producing that level of output.
4) Zero economic profit includes a normal return for business owner. However, how do we know that the business owner will be satisfied with zero economic profit?
- In other words, if a business owner is earning zero economic profit, is there another opportunity out there that might offer a positive economic profit?
- If so, will the business owner leave the zero profit industry to pursue the positive economic profit?