This topic contains a solution. Click here to go to the answer

Author Question: Why do firms in perfectly competitive markets have no control over the price of their products? ... (Read 76 times)

tth

  • Hero Member
  • *****
  • Posts: 579
Why do firms in perfectly competitive markets have no control over the price of their products?
 
  What will be an ideal response?

Question 2

Compare and contrast the effect of perfect competition to the effect of perfect price discrimination on: a) efficiency. b) consumer surplus. c) economic profit in the long run.
 
  What will be an ideal response?



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

zhanghao

  • Sr. Member
  • ****
  • Posts: 316
Answer to Question 1

Firms in competitive markets are price takers, because all firms in the market
produce identical products and each firm is small relative to the size of the market. Raising prices above this price would result in losing all its sales because consumers perceive the products to be identical. Setting a price below this level would not increase the number of consumers but only result in a decline in revenue.

Answer to Question 2

a) Both perfect competition and perfect price discrimination create efficiency.
b) Consumers receive consumer surplus with perfect competition. However, there is no consumer surplus with perfect price discrimination.
c) Perfectly competitive firms cannot make an economic profit in the long run. A perfectly price discriminating monopoly makes the maximum amount of economic profit.




tth

  • Member
  • Posts: 579
Reply 2 on: Jun 29, 2018
Wow, this really help


irishcancer18

  • Member
  • Posts: 310
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

 

Did you know?

The most dangerous mercury compound, dimethyl mercury, is so toxic that even a few microliters spilled on the skin can cause death. Mercury has been shown to accumulate in higher amounts in the following types of fish than other types: swordfish, shark, mackerel, tilefish, crab, and tuna.

Did you know?

Cytomegalovirus affects nearly the same amount of newborns every year as Down syndrome.

Did you know?

More than 4.4billion prescriptions were dispensed within the United States in 2016.

Did you know?

Warfarin was developed as a consequence of the study of a strange bleeding disorder that suddenly occurred in cattle on the northern prairies of the United States in the early 1900s.

Did you know?

Despite claims by manufacturers, the supplement known as Ginkgo biloba was shown in a study of more than 3,000 participants to be ineffective in reducing development of dementia and Alzheimer’s disease in older people.

For a complete list of videos, visit our video library