This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Why do firms in perfectly competitive markets have no control over the price of their products? ... (Read 101 times)

tth

  • Hero Member
  • *****
  • Posts: 579
on: Jun 29, 2018
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
Reply #1 on: Jun 29, 2018
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
YES! Correct, THANKS for helping me on my review

Mochi

  • Member
  • Posts: 300
Reply 3 on: Yesterday
Excellent

« previous next »
 

Did you know?

The first documented use of surgical anesthesia in the United States was in Connecticut in 1844.

Did you know?

Vaccines cause herd immunity. If the majority of people in a community have been vaccinated against a disease, an unvaccinated person is less likely to get the disease since others are less likely to become sick from it and spread the disease.

Did you know?

Astigmatism is the most common vision problem. It may accompany nearsightedness or farsightedness. It is usually caused by an irregularly shaped cornea, but sometimes it is the result of an irregularly shaped lens. Either type can be corrected by eyeglasses, contact lenses, or refractive surgery.

Did you know?

Allergies play a major part in the health of children. The most prevalent childhood allergies are milk, egg, soy, wheat, peanuts, tree nuts, and seafood.

Did you know?

IgA antibodies protect body surfaces exposed to outside foreign substances. IgG antibodies are found in all body fluids. IgM antibodies are the first type of antibody made in response to an infection. IgE antibody levels are often high in people with allergies. IgD antibodies are found in tissues lining the abdomen and chest.

Genetic control of eye evolution. Genetic control of eye evolution.
Natural Products Used as Antineoplastic Therapy Natural Products Used as Antineoplastic Therapy
With a three-way catalytic converter, emission control is most efficient with an air–fuel ratio ... With a three-way catalytic converter, emission control is most efficient with an air–fuel ratio ...
Comparison of Control by the Nervous and Endocrine Systems Comparison of Control by the Nervous and Endocrine Systems
Phrenology model showing areas of the head overlaying brain regions that control different traits. I Phrenology model showing areas of the head overlaying brain regions that control different traits. I
Four bacterial amino acid operons with attenuator control of transcription Four bacterial amino acid operons with attenuator control of transcription
Video: Physiology of Asthma

For a complete list of videos, visit our video library