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PDtax
PDtax, Master's Degree
Category: Business and Finance Homework
Satisfied Customers: 4552
Experience:  MBA/CPA, Former college instructor and tutor.
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Hello, I have a few more questions. Can you help?

This answer was rated:

Hello, I have a few more questions. Can you help?

MJA1415 :

Please provide data and your deadline, thanks.

Customer:

Hello, i am in need of some help on my economics homework. i have 3 questions that i would like answered.

Customer:

i would need this by tuesday night

MJA1415 :

Sorry the subject is out of my scope therefore I am opting out so other experts may help you, take care.

please post the questions.

Welcome to the site. I'm PDtax, and helped you yesterday. When you post a question for a specific Expert, please use that Expert's name.

Please advise if you want my assistance by responding to the Expert of your choice by name.

Customer: replied 3 years ago.

PDtax,


Can you assist with the following economics questions?


 


1) Firms in a competitive market maximize profits by operating at the level of output, which minimizes their average cost of production in the short run. Agree or disagree with this statement and explain your reasons.


 


2) What features characterize a ”perfectly competitive” market? What rule will guide the supply decision of a perfectly competitive firm in such a market? What will be the long run equilibrium price in such a market?


 


3) Explain the importance of "free entry" in establishing the long run equilibrium price.


 


4) "In a world in which all markets were perfectly competitive, the ceaseless search for maximum profits will drive all prices down to the level of minimum average cost in the long run" Agree or disagree with this statement and explain your reasoning.

Hi again, and thanks for asking for me.

I will work on these for tomorrow morning.

PDtax
Customer: replied 3 years ago.


Thanks, XXXXX XXXXX?

is tomorrow morning ok?
Customer: replied 3 years ago.

Hi, unfortunatlly i need it for tonight. If you cant do it, can we close out this request?

I'll do it. Working on it now.
1) Firms in a competitive market maximize profits by operating at the level of output, which minimizes their average cost of production in the short run. Agree or disagree with this statement and explain your reasons.


False. In the long run, under perfect competition, firms should produce where average costs are minimized. The long-run average cost curve is formed by determining the minimum cost at every level of output. In the short run, however, the firm might not be producing the optimal long-run output. Thus, if there are any fixed factors of production, the firm does not always produce where long-run average cost is minimized.



2) What features characterize a ”perfectly competitive” market? Large numbers of buyers and sellers, Free entry and exit, Product homogeneity, and Perfect information.

What rule will guide the supply decision of a perfectly competitive firm in such a market? supply and demand (of a homogeneous product).

What will be the long run equilibrium price in such a market?
Long run average cost.




3) Explain the importance of "free entry" in establishing the long run equilibrium price.

No differential impediment to entry or exit allow any number of makers to enter a marketplace and allow the perfect competition to commence. Issues such as patents or other hindrances to entry mean a comparative advantage to the patent holder.


4) "In a world in which all markets were perfectly competitive, the ceaseless search for maximum profits will drive all prices down to the level of minimum average cost in the long run" Agree or disagree with this statement and explain your reasoning. I disagree. Cost differences between firms contribute to inequities, as do capacity levels and other factors. Each firm will produce to its long run average cost curve lowest point, which can be different for each vendor.
PDtax, Master's Degree
Satisfied Customers: 4552
Experience: MBA/CPA, Former college instructor and tutor.
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