Firm industry a firm is a single business an industry

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Firm Industry A firm is a single business. An industry includes any business that produces certain services and products. A firm is a business establishment inside an industry. Industry refer to a kind of business inside an economy.
3. What is the shape of the demand curve faced by the perfectly competitive firm? Why? Shape of demand curve: Horizontal straight line If the a firm sells a product with the price higher than market-established price, no one will buy. Vice versa. (No incentive to charge below the market-established price) WHY? 1. Sells homogenous products 2. Buyers are informed about where to purchase the product at the lower price. Pric e Quan tity Q P D=AR =MR A T C M C
4. Explain the differences between resource allocative efficiency and productive. Resource Allocative Efficiency A firm that produce the quality of output at which Price = Marginal cost. Resource are allocated in the most efficient way to produce the mix of product and service that is most wanted by society Productive Efficiency A firm that produce its output at the lowest possible per unit cost (minimum amount of resources will be used to produce any particular output) To change a price that is just consistent with the cost P = minimum ATC (unit cost)
5. Why is the perfectly competitive firm is a price taker? It finds itself one among many firms where its supply is small relative to the total market supply. It sells a homogeneous product in a environment. Buyers and sellers have all relevant information.
6. Given the following information, state whether the firm (perfect competition market) should shut down, or continue to operate in the short run. a) Q = 100; P = $10; AFC = $3; AVC = $4 b) Q = 70; P = $5; AFC = $2; AVC = $7 c) Q = 150; P = $7; AFC = $5; AVC = $6 a) AFC + AVC = ATC . ATC = $7 and P = $10. Since P (RM10) > ATC (RM7=RM3+RM4) & > AVC. Hence, continue to operate in the short run. b) ATC = $9 and P = $5. P < ATC. Besides, P is also < AVC. Hence, shut down in the short run. c) ATC = $11 and P = $7. P < ATC. However, P is > AVC. Hence, continue to operate in the short run.
7. Using the following table, what quantity of output should the firm produce? Produce 4 and 5. Because the (4) firm’s profit = TR-TC($400-$260)=$140 And the (5) firm’s profit =TR-TC($500-$360)=$140 Q TR TC 0 $0 $0 1 100 50 2 200 110 3 300 180 4 400 260 5 500 360 6 600 480
Theory of Market Structure: Perfect Competition Tutorial 10
1. Assume that the market price for a perfectly competitive firm’s product is fixed at RM3. (i) Complete the table below. Output Total Revenue (TR) (RM) Total Cost (TC) (RM) Marginal Revenue (MR) (RM) Marginal Cost (MC) (RM) 0 - 1 - - 1 3 2 3 1 2 6 4 3 2 3 9 7 3 3 4 12 11 3 4 5 15 16 3 5
(ii) At what output level does the firm maximise profit or minimize loss? 3 MR=Mc
(iii) Will the long-run equilibrium price equal to RM3? Why? No,because the firm is earning positive of RM2 . when there is a profit,outsider may come in and supply increase,hence it will drive the price down .
2. The following table shows the total revenue and total cost of a firm at the various quantities of output: Calculate the marginal cost and marginal revenue of the firm.

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