Describe and explain how a perfectly competitive firm's demand curve is found
What will be an ideal response?
The interaction of supply and demand in the industry determines the price. The firm is a price taker, so it takes the price as a given. It can sell as many units as it wants at this price. Hence, the demand curve for the product of a perfectly competitive firm is perfectly elastic, or horizontal, at the market price.
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When the current price of a good is below the equilibrium price:
A. sellers will notice their inventories are growing. B. the price will tend to stay below the equilibrium price. C. buyers have an incentive to offer to pay sellers more than the current price. D. there will be excess supply.
Perfect competition forms one extreme of the market structure spectrum.
Answer the following statement true (T) or false (F)
A private cost is a cost of production that is borne by the
A) consumer of the good. B) producer of the good. C) government. D) consumer of the good and the government.
Regulation Q put a ceiling on
A) bank loan rates. B) loan rates at all depository institutions. C) deposit rates. D) the proportion of a savings-and-loan's assets made up of loans other than mortgages.