If a perfectly competitive firm manufacturing chairs decides to produce 100 more chairs, what happens to the market price of a chair?
What will be an ideal response?
The price will not change. Any one perfectly competitive firm is such a small part of the market that a change in its output has virtually no effect on the price. This result is why the firm's marginal revenue equals its price: No matter how much (or how little) the firm produces, the marginal revenue from one more unit always equals the price of the product.
You might also like to view...
Vicki would be classified as
A) a voluntary part-time worker. B) unemployed. C) an involuntary part-time work. D) not in the labor force because she is a full-time student. E) a discouraged worker.
A proportional income tax is a tax that taxes income at a constant rate
Indicate whether the statement is true or false
If the money supply grows faster than the rate of growth in GDP
A) prices fall. B) interest rates fall. C) prices rise. D) none of these choices.
An early application of anti-trust law, to force the breakup of one firm's vertically integrated control over every aspect of the production, processing, and distribution of an essential product, occurred in the
A. AT&T Case. B. Microsoft case. C. Napster case. D. Standard Oil case.