Why is the demand curve horizontal for a perfectly competitive firm?
What will be an ideal response?
The demand curve for a perfectly competitive firm is horizontal to reflect the fact that if it raises its price, its sales will drop to zero. The firm has no control over the market price.
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How is the average product of labor calculated?
What will be an ideal response?
When regulating a natural monopoly, government officials
a. can set an efficient price, but the firm will suffer a loss b. can arrange a Pareto improvement by leaving the firm alone c. should force the firm to set a price equal to minimum marginal cost d. should force the firm to set a price equal to minimum long-run average total cost e. will increase efficiency if they force the firm to produce where MR = MC.
If an economy can produce more of one good without giving up any of another good, then the economy’s current production point is inefficient.
Indicate whether the statement is true or false.
Refer to the graph shown. What price represents the shutdown price?
A. P1 B. P2 C. P3 D. P4