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Author Question: Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is ... (Read 140 times)

beccaep

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on: Jun 29, 2018
Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price.
 
  Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

Question 2

When would a risk averse individual not insure a risky event?
 
  What will be an ideal response?


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mariahkathleeen

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Reply #1 on: Jun 29, 2018
Answer to Question 1

If Jane lowers her price, her profit will not increase. As a perfectly competitive firm, Jane can sell as much of her service as she wants at the going market price. And to maximize her profit, she should choose the quantity at which her marginal cost equals the market price. If Jane lowers the price, her total revenue, and hence profit, will fall.

Answer to Question 2

Risk averse individuals are always willing to pay more than the minimum cost of insurance up to a point. If the insurance is priced above the maximum price the individual is willing to pay, he or she will not buy the insurance.


beccaep

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Reply 2 on: Jun 29, 2018
Great answer, keep it coming :)

chjcharjto14

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Reply 3 on: Yesterday
Gracias!

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