1 A single firm in a perfectly competitive market is a price

1. A single firm in a perfectly competitive market is a price taker? True or False. Explain with examples. 2. What is the supply curve of a perfectly competitive firm? Is it different from that of the market supply curve? Explain. 3.If a firm makes a loss in the short run, then it would shut down? If no, discuss. If yes, discuss.Offer examples 4. Does the monopolist have a supply curve? Discuss

Solution

. True. A single firm in a perfectly competitive market is a price taker. The demand curve for a perfectly competitive firm is horizontal, i.e. perfectly elastic. The firm cannot increase the price as he will lose all his customers since they will switch to another firm which sells at a lower price. The products in a perfectly competitive firm is homogenous.

2.The supply curve of an individual firm is upward sloping which means at higher prices more quantity is supplied. Market supply curve is the summation horizontall of the individual firms. Market supply is the total quantity supplied at various prices levels. It is the movement along the supply curve

\' Quantity supplied   

Price ($) per unit Mike Tom Market supply

1.00 5 4 9

2.00 8 6 14

3.00 10 8 18

3. Not necessary. A firm can continue to produce in the short run if price is above the shutdown point, which is the minimum AVC,

4.A monopolist does not have a supply curve. He is a price maker. He determines how much to set the price of his goods. The supply of a monopolist depends upon the demand curve which he faces.