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 88 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
Great answer, keep it coming :)

amandalm

  • Member
  • Posts: 306
Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

« previous next »
 

Did you know?

Eat fiber! A diet high in fiber can help lower cholesterol levels by as much as 10%.

Did you know?

Stevens-Johnson syndrome and Toxic Epidermal Necrolysis syndrome are life-threatening reactions that can result in death. Complications include permanent blindness, dry-eye syndrome, lung damage, photophobia, asthma, chronic obstructive pulmonary disease, permanent loss of nail beds, scarring of mucous membranes, arthritis, and chronic fatigue syndrome. Many patients' pores scar shut, causing them to retain heat.

Did you know?

Hippocrates noted that blood separates into four differently colored liquids when removed from the body and examined: a pure red liquid mixed with white liquid material with a yellow-colored froth at the top and a black substance that settles underneath; he named these the four humors (for blood, phlegm, yellow bile, and black bile).

Did you know?

There are over 65,000 known species of protozoa. About 10,000 species are parasitic.

Did you know?

The average older adult in the United States takes five prescription drugs per day. Half of these drugs contain a sedative. Alcohol should therefore be avoided by most senior citizens because of the dangerous interactions between alcohol and sedatives.

Genetic control of eye evolution. Genetic control of eye evolution.
Genetic control of root hair development. Genetic control of root hair development.
Control of Components of REM Sleep by the REM-ON Region Control of Components of REM Sleep by the REM-ON Region
Quality control analytics Quality control analytics
Long Term Control Medications Long Term Control Medications
Video: Definition of heart rate

For a complete list of videos, visit our video library