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The firm supply curve is horizontal in a perfectly competitive market because individual firms are price takers; they sell their products at the market price set by overall supply and demand. At this price, firms can sell any quantity they choose without affecting the market price. Therefore, they will supply as much as they can produce at that price, leading to a horizontal supply curve. If the price falls below this level, firms would not cover their costs and would reduce output to zero.
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Why is world supply curve horizontal?
The world supply curve is considered perfectly elastic.
What is difference between individual supply curve and market supply curve?
The difference between individual supply curve and the market supply curve is tat individual supply curve is like a firm. To be able to get the market supply curve you have to have the individual supply curve.
What does a firm's supply curve for a good indicate?
A firm's supply curve for a good indicates the quantity of that good the firm is willing and able to produce and sell at different prices.
A firm's marginal cost curve above the average variable cost curve is also?
A firm's short run supply curve
Why does a Perfect Competition firms demand curve is also its marginal revenue curve?
AnswerFor a perfectly competitive firm with no market control, the marginal revenue curve is a horizontal line. Because a perfectly competitive firm is a price taker and faces a horizontal demand curve, its marginal revenue curve is also horizontal and coincides with its average revenue (and demand) curve. Yes - what you must remember is that a firm's demand curve in perfect competition is its average revenue curve. Average revenue = price x quantity / quantity = price. The demand curve shows the quantity demanded at varying prices and this is exactly what the average revenue curve will do.Because there are so many sellers in the market, no one firm has enough market power to influence price (if a firm tried to raise price consumers would move to different suppliers; nobody would buy the good), therefore price is determined by industry supply and demand, and a firm can produce any quantity at this price . This means that the firm faces a horizontal average revenue (demand curve) and if average revenue is constant, this means total revenue is increasing at a constant rate, and therefore marginal revenue is constant as well.
Why is world supply curve horizontal?
The world supply curve is considered perfectly elastic.
How is a market supply curve similar to an individual supply curve?
The individual supply curve is the supply curve of a single firm producing output. Now say there are X individual producers there at any price P* the total available output is the output of all X producers ( a horizontal summation) this total of each individual supply curve gives the market supply curve. Put it simply all firms sell their output in the market.
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.
What is difference between individual supply curve and market supply curve?
The difference between individual supply curve and the market supply curve is tat individual supply curve is like a firm. To be able to get the market supply curve you have to have the individual supply curve.
What does a firm's supply curve for a good indicate?
A firm's supply curve for a good indicates the quantity of that good the firm is willing and able to produce and sell at different prices.
A firm's marginal cost curve above the average variable cost curve is also?
A firm's short run supply curve
Why does a Perfect Competition firms demand curve is also its marginal revenue curve?
AnswerFor a perfectly competitive firm with no market control, the marginal revenue curve is a horizontal line. Because a perfectly competitive firm is a price taker and faces a horizontal demand curve, its marginal revenue curve is also horizontal and coincides with its average revenue (and demand) curve. Yes - what you must remember is that a firm's demand curve in perfect competition is its average revenue curve. Average revenue = price x quantity / quantity = price. The demand curve shows the quantity demanded at varying prices and this is exactly what the average revenue curve will do.Because there are so many sellers in the market, no one firm has enough market power to influence price (if a firm tried to raise price consumers would move to different suppliers; nobody would buy the good), therefore price is determined by industry supply and demand, and a firm can produce any quantity at this price . This means that the firm faces a horizontal average revenue (demand curve) and if average revenue is constant, this means total revenue is increasing at a constant rate, and therefore marginal revenue is constant as well.
In which range of the aggregate supply curve is the price level constant?
Horizontal.
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.
Explain why the MC curve can be considered to be the individual firm's supply curve under conditions of Perfect Competition can the whole length of MC be considered the supply curve Whywhy not?
if the MC=Price, the firm got the maximum profit. that's what they want.
Why is the short-run aggregate supply curve horizontal if?
The short-run aggregate supply curve is horizontal if the economy is operating below full capacity, meaning there are unused resources like labor and capital. This indicates that firms can increase production without raising prices, resulting in a flat supply curve.
How do you derive the supply curve of an industry from the supply curve of the firm?
Set MC=AVC and solve for the values that a firm will produce at. Once you've found these values, set price = MC(S(p)) and solve for supply in terms of quantity.
