Why is it that the industry demand curve slopes downward when the demand curves faced by individual firms in perfectly competitive markets are horizontal?
What will be an ideal response?
Every firm in a competitive market is so small that it can increase production without affecting the price of the good. Therefore a firm in a perfectly competitive market faces a perfectly elastic demand curve. The market demand curve is downward-sloping, which reflects the law of demand: consumers will purchase higher quantities of a good at lower prices and lower quantities at higher prices.
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In the long run, a firm in monopolistic competition will produce
A) where average total cost is minimized. B) where price equals average total cost but average total cost is not at its minimum. C) zero output. D) any possible amount of output. E) where price equals marginal cost.
With careful planning, we can usually get something that we like without having to give up something else that we like
a. True b. False Indicate whether the statement is true or false
Which is an example of an automatic stabilizer? As real GDP decreases, income tax revenues:
A. increase and transfer payments decrease. B. and transfer payments decrease. C. and transfer payments increase. D. decrease and transfer payments increase.
Which statement is true?
A. The perfect competitor sets her price. B. Perfect competitors sell below market price to attract new customers. C. In the long run the perfect competitor produces at an output at which ATC is falling. D. The perfect competitor makes zero economic profit in the long run.