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Chapter 6 Practice - Chapter 6 Repetition and Practice...

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Chapter 6 Repetition and Practice
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Assumptions of Pure Competition Why is a firm in a purely competitive market not able to set the price of its own goods?
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Assumptions of Pure Competition each firm is relatively small its output decision does not influence the market price identical products if a firm charges a higher price than the market price it looses all its customers
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Assumptions of Pure Competition Why does a firm under pure competition always earn an economic profit of zero in the long-run?
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Assumptions of Pure Competition free entry/exit Result: if firms earn economic profits entry of additional competitors supply shift market price decreases economic profits decrease until... Zero economic profit (= normal profit) If firms make losses exit market supply shift market price increases losses decline until normal profit
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Firm Behavior under Pure Competition How much should a firm produce?
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