If a perfectly competitive firm manufacturing chairs produces 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.
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The above figure shows the demand and cost curves for a firm in monopolistic competition. The firm earns total revenue of
A) $120. B) $40. C) $160. D) $0.
A major problem in developing an activist policy is
A) uncertainty about the magnitude of the dynamic multiplier. B) uncertainty about the length and variability of policy lags. C) uncertainty about the costs of various policies. D) All of the above are correct.
If a 5 percent change in the price of a good elicited a 5 percent change in the quantity demanded of the good, we would say that over this range of prices the good has a(n)
A) elastic demand. B) inelastic demand. C) perfectly elastic demand. D) unit elasticity of demand.
When the price of a product increases, the marginal revenue product curve in a perfectly competitive market
A) does not change. B) becomes flatter. C) shifts to the right. D) shifts to the left.