In perfect competition, when market demand decreases, explain how ...

[ap345]

In perfect competition, when market demand decreases, explain how the price of the good and the output and profit of each firm changes in the short run.
 
  What will be an ideal response?

Question 2

All of the following questions or statements regarding medical school are positive except
 
  A) Medical students who enter specialized fields make a larger contribution to society than do student who enter primary care.
  B) What role does tuition play in a student's decision about whether to attend medical school?
  C) Have tuition increases had a large effect or a small effect on the number of applications to medical school?
  D) How do changes in expected future incomes affect the decisions of medical students about which specialty to choose?

[djofnc]

Answer to Question 1

When market demand decreases, the market price of the good falls and the market quantity decreases. Because the price equals marginal revenue, the fall in the price means marginal revenue falls. As a result, each firm moves down its marginal cost curve so each firm decreases the quantity it produces. The firm's economic profit falls (or its economic loss increases). If the firm had been making a normal profit before the decrease in demand, after the decrease the firm incurs an economic loss.

Answer to Question 2

A

[ap345]

Excellent

[mcarey591]

Wow, this really help