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Price can be substituted for marginal revenue in the MR equal MC rule when an industry is purely competitive because price?
Wiki User
∙ 8y ago
Is constant regardless of the quantity demanded.
Wiki User
∙ 8y ago
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Why can price be substituted for marginal revenue in the MR equals MC rule?
It can be substituted because the industry would become purely competitive.
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.
How a monopoly firm will not achieve allocative efficiency?
They produce at a different point than a competitive firm, a monopoly produces at a point where marginal revenue= marginal cost, where a competitive firm equates price to marginal cost. The marginal cost curve is lower than the demand curve, but the monopoly charges the price at the demand curve, which is a higher price and a lower quantity than a competitive market would produce.
Why is it that firms can earn profits in the long run in monopoly and oligopoly but not in monopolistic competition and perfect competition?
Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.
Perfect competition is efficient in the long run because price marginal cost and firms are producing at minimum?
Perfect competition is efficient in the long run because price _____ marginal cost and firms are producing at minimum _____.
Why can price be substituted for marginal revenue in the MR equals MC rule?
It can be substituted because the industry would become purely competitive.
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.
Why is it that firms can earn profits in the long run in monopoly and oligopoly but not in monopolistic competition and perfect competition?
Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.
How a monopoly firm will not achieve allocative efficiency?
They produce at a different point than a competitive firm, a monopoly produces at a point where marginal revenue= marginal cost, where a competitive firm equates price to marginal cost. The marginal cost curve is lower than the demand curve, but the monopoly charges the price at the demand curve, which is a higher price and a lower quantity than a competitive market would produce.
Perfect competition is efficient in the long run because price marginal cost and firms are producing at minimum?
Perfect competition is efficient in the long run because price _____ marginal cost and firms are producing at minimum _____.
How does the pipe fitting industry stay competitive?
Because of the focus in the 2000s on providing solutions and products to meet individualized needs, the industry was expected to develop and use new technologies in order to stay competitive, including computer and electronic technologies.
Why does price equal marginal revenue for a firm in a perfectly competitive industry?
In a perfectly competitive industry marginal revenue or (the cost to produce one more unit) stays constant so for example a pencil costs 1 dollar to make at the 101st pencil it will still cost 1 dollar to make. the price at which it must sell it at is also one dollar because if the company decides to raise the price it will lose all of its consumers to another firm competing with them that sells pencils at 1 dollar. the firm would be able to sell nothing at a higher price because the market is so competitive therefore, you can not raise the marginal revenue without raising the price and you cannot raise the price because the firm runs the risk of selling nothing therefore they stay equal. A perfectly competitive firm takes the market price as given, (They cannot set the price at which they sell the item the other firms through supply and demand have already sorted that out) so the firm-specific demand curve is horizontal. The firm can sell all it wants at the market price, but would sell nothing if it charged a higher price.
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.
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.
The equality of marginal revenue and marginal cost is essential for profit maximization in all market structures because if?
Marginal revenue and marginal cost are equal, any other output level will result in reduced profit.
Are marginal revenue average revenue and price are all equal for a monopolist?
No, in a monopolistic market, marginal revenue is less than average revenue and price. This is because the monopolist must lower the price in order to sell more units, leading to a decline in revenue per unit.
Why can cheese be substituted for meat?
because it has protein
