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Indeed it is. A competitive market means that there are a lot of companies that sell the same product. With this conditions, if a company rise the price, consumers will easily find another company, losing all profits.
Therefore a firm cannot control the price in a competitive market, it has to take the market price.
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A purely competitive firm is precluded from making economic profit in the long run because?
it is a price taker
Why a firm in a purely competitive labor market a wage taker?
This is due to the fact that their are other firms competing to get that same labour, therefore making them a wage taker.
In long run equilibrium a purely competitive firm will operate where price is?
nn
The representative firm in a purely competitive industry?
will
Why producers are price takers and not price makers?
Producers are not strictly price-takers. Generally, the more competitive a market is, the less pricing power a firm has, and the more of a price-taker it is than a price-maker. Since basic economic analysis usually focuses on a perfectly competitive market, a producer is a price-taker because it cannot change its price from the equilibrium condition Price = Marginal Cost = Marginal Revenue because it will be undersold by its competitors if it raises it price.
A purely competitive firm is precluded from making economic profit in the long run because?
it is a price taker
Why a firm in a purely competitive labor market a wage taker?
This is due to the fact that their are other firms competing to get that same labour, therefore making them a wage taker.
In long run equilibrium a purely competitive firm will operate where price is?
nn
The representative firm in a purely competitive industry?
will
Why producers are price takers and not price makers?
Producers are not strictly price-takers. Generally, the more competitive a market is, the less pricing power a firm has, and the more of a price-taker it is than a price-maker. Since basic economic analysis usually focuses on a perfectly competitive market, a producer is a price-taker because it cannot change its price from the equilibrium condition Price = Marginal Cost = Marginal Revenue because it will be undersold by its competitors if it raises it price.
Can a perfectly competitive firm set a price for its products that is above marginal cost?
A perfectly competitive firm would set its prices at a perfectly competitive price.
Explain why perfect competition may result in allocative efficiency?
Because in a perfectly competitive market, resources are used perfectly efficiently (excuse the grammar). A purely competitive market has very many peculiar features. One of them is that every firm is a price taker. This means they cannot set the price, so they must be as efficient as the most efficient competitor or they will be out-priced. This results in inefficient firms going out of business and only the most efficient staying alive.
Profits encourage entry into purely competitive industries and losses encourage exit from purely competitive industries because?
When profits are zero, the firm is earning sufficient revenue to cover the opportunity cost.
In a perfectly competitive market while an industry is a price maker an individual firm is a price taker elaborate?
An industry is a price maker because many companies compete and the market dictates the price. Companies are price takers because they can't set the prices. Organizations have to focus on keeping cost low.
If a perfectly competitive firm's price is above its average total cost the firm?
is earning a profit
A firm operating in a purely competitive resource market faces a resource supply curve that is?
B. Perfectly elastic This is because it is operating in a perfect competitive market
Why the demand curve faced by a perfectly competitive firm is horizontal?
The firm at perfect competition faces more than one competitor. All the firms are price taker and they take the market price as given. If one firm wants to sell its output at a pricehigher than the market price, it will sell nothing as buyers will go to the firm offering lower market price. If one firm wants to sell its output at a lower price, it will take the whole market demand for it. At the market price, determined by interactions between sellers, the firms will sell whatever output it wants. So, the firms determine the price and each firm determines its output. So the demand curve will be horizontal.
