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Can a perfectly competitive firm set a price for its products that is above marginal cost?
Wiki User
∙ 11y ago
A perfectly competitive firm would set its prices at a perfectly competitive price.
Wiki User
∙ 11y ago
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How is a perfectly competitive firms marginal cost curve related to its supply curve?
a perfectly competitive firms supply curve will be the portion of the marginal cost curve which lies above the average variable cost curve (AVC)..this will be due to the firms unwillingness to supply below the price in which they could cover their variable costs
Why does the marginal cost curve correspond to the supply curve?
A perfectly competitive firm's supply curve is that portion of its' marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. As such, the firm moves along it's marginal cost curve in response to alternative prices. Because the marginal cost curve is positively sloped due to the law of diminishing marginal returns, the firm's supply curve is also positively sloped.
A purely competitive firm's short-run supply curve is?
Because of the price taking nature of the firm in the perfectly competitive market. The supply curve would be the portin of the (Marginal Cost Curve) that disects the (P=Ar=Mr curves). Som from that point up would be the supply curve, to produce below that point would not be beneficial to the establishment. Up sloping and equal to the portion of the marginal cost curve that lies above the average variable cost. The demand curve is also perfectly elastic, this too contributes to the fact.
If a perfectly competitive firm's price is above its average total cost the firm?
is earning a profit
What does marginal revenue products refers to?
The marginal product is the output produced by one more unit of a given input. Found at http://www.econmodel.com/classic/terms/marginal_product.htm
How is a perfectly competitive firms marginal cost curve related to its supply curve?
a perfectly competitive firms supply curve will be the portion of the marginal cost curve which lies above the average variable cost curve (AVC)..this will be due to the firms unwillingness to supply below the price in which they could cover their variable costs
Why does the marginal cost curve correspond to the supply curve?
A perfectly competitive firm's supply curve is that portion of its' marginal cost curve that lies above the minimum of the average variable cost curve. A perfectly competitive firm maximizes profit by producing the quantity of output that equates price and marginal cost. As such, the firm moves along it's marginal cost curve in response to alternative prices. Because the marginal cost curve is positively sloped due to the law of diminishing marginal returns, the firm's supply curve is also positively sloped.
What is a firm's short run supply curve?
A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.
A purely competitive firm's short-run supply curve is?
Because of the price taking nature of the firm in the perfectly competitive market. The supply curve would be the portin of the (Marginal Cost Curve) that disects the (P=Ar=Mr curves). Som from that point up would be the supply curve, to produce below that point would not be beneficial to the establishment. Up sloping and equal to the portion of the marginal cost curve that lies above the average variable cost. The demand curve is also perfectly elastic, this too contributes to the fact.
If a perfectly competitive firm's price is above its average total cost the firm?
is earning a profit
What will happen if an individual perfectly competitive firm charges a price above the industry equilibrium price?
If an individual in a perfectly competitive firm charges a price above the industry equilibrium price this is bad. This company will go out of business quickly because their customers will go find the lower price.
What does marginal revenue products refers to?
The marginal product is the output produced by one more unit of a given input. Found at http://www.econmodel.com/classic/terms/marginal_product.htm
What is the distinction between marginal revenue product and marginal revenue?
I'm thinking that marginal revenue product is the marginal revenue on one product, and marginal revenue is the marginal revenue on the whole firm sales... I'm wondering the same thing but the above response is incorrect. both terms imply values on one item as indicated by the "marginal"
Relationship between marginal cost and the supply curve for a purely competitive firm?
Marginal cost curve above the average variable cost curve, is the same as the short run supply curve. In perfect competition, MC=Price. It follows that production will be at that point. Hence the supply curve is the same as that part of the MC curve which is above AVC, where the firm can cover its variable cost....this is better than shutting down.
Is it possible for perfect competitive market to be inefficient?
It is possible for perfectly competitive markets to be inefficient when externalities are present. Externalities arise when an economic activity has an unintended impact on other economic agents and/or the market. This results in there being a socially optimal level of production that does not coincide with the privately determined equilibirum level of production derived from the supply and demand curves (which, respectively, represent the marginal private costs and marginal private benefits to producers and consumers). With respect to the efficiency of markets, positive externalities result in too little of the good in question being produced. In this case, the market equilibrium is lower than desired (the marginal social benefit curve lies above the marginal private benefit [demand] curve). In this case, the efficient market outcome would occur where the marginal social beneift curve interests the marginal private cost (supply) curve. When negative externalities occur, too much of the good in question is being produced. This results in the supply curve, which represents the marginal private costs of production, lying below the marginal social cost curve because the private cost curve fails to take into account the costs of production incurred by all of society. In this case, the efficient market outcome would occur where the marginal social cost curve coincides with the private marginal benefit (demand) curve.
Difference between average revenue and marginal revenue?
"Average revenue", for a specific level of sales, is the total revenue divided by the number of units sold, or in other words, revenue per unit, or, simply, "price". This average is over the entire sales in a given time period, market, etc. "Marginal revenue" is "average revenue" evaluated at every possible level of sales. You see, the more you sell, the lower the price will be, according to the law of demand. If you sell 1,000 widgets, you may get $1 apiece for them, but if you sell 10,000 of them, you may have to lower the price to 90 cents to sell them all. Of course, if the market is perfectly competitive (you have lots of competitors selling widgets), then you alone can't affect the price very much with your change in output, and the Marginal Revenue is, essentially, constant, at least over the relevant range of level of sales. However, even in perfect competition, you could, theoretically, increase your sales so much that you dominate all of your competitors, and then you would have to lower your price to sell all of your widgets. The thing is, under perfect competition, everyone is operating exactly at the level of sales where marginal cost is equal to marginal revenue, so if your marginal revenue goes down, your marginal profit becomes negative. So you won't do that. In fact, this concept of marginal revenue (when compared to marginal cost) is exactly the mechanism that ensures you don't try to dominate a perfectly competitive market. (If the market is a monopoly, or oligopoly, however, all bets are off. For that matter, even if a market is otherwise perfectly competitive (large number of firms) but entry and exit are not free (say, large start-up costs), a firm with deep enough pockets can put everyone else out of business by over-producing for a while and driving the price down to where all firms are losing money, then raise the price back up, to even above the previous price, once it becomes a monopoly.)
What is meant by an efficient market equilibrium?
When there is allocative and productive efficiency, there is an efficient market equilibrium, allocative efficiency is when the products that are most wanted are produced, this is achieved when price equals marginal cost, productive efficiency is achieved when the firm is producing on the lowest point on the lowest average cost curve, this is also called the point of technical efficiency, both allocative and productive efficiency lead to an optimum allocation of resources and economic efficiency is achieved, though, this is thought to exist only in a perfectly competitive market and is lacking in other markets because monopolies and oligopolies usually have their prices above marginal cost and that is not an efficient allocation of resources and because other markets may lack the incentive to produce at the lowest cost
