Suppose the wheat market is perfectly competitive. As such which of the following would be true?...

Suppose the wheat market is perfectly competitive. As such which of the following would be true? A. The market will maximize welfare for economic agents. B. The market will provide economic profits to all the sellers. C. The market will maximize consumer surplus and minimize producer surplus. D. All of the other answers are incorrect E. The market will minimize total cost.

Expert Solution

A perfectly competitive firm is a price taker (it takes market price as given) and to maximize profit, it produces at the point where market price = MC. If at the profit maximizing quantity, price is less than the firm's ATC, then the firm makes loss in the short run. If at the profit maximizing quantity, market price is greater than the ATC (which means Total revenue > total cost),then the firm makes economic profit in the short run. So, if the market is perfectly competitive, you can't be sure about wheather each firm is making economic profit or loss if you don't know about the position of the firm's ATC curve.

Each perfectly competitive seller faces perfectly elastic demand curve for its product. Each individual acts according to their own self interest and is led by an 'invisible hand' to a course of action that maximizes welfare for economic agents. Only in perfect competition, total surplus is at it's maximum.

Answer: option A

Rahul Sunny answered 9 months ago

Which of the following is true in a theoretical perfectly competitive market? market demand is perfectly...

Which of the following is true in a theoretical perfectly competitive market? market demand is perfectly inelastic a firm's marginal revenue curve is equal to the market price market demand in a perfectly elastic an individual firm can obtain a higher price by reducing their level of output.

Which of the following is true about both a perfectly competitive market and a market with...

Which of the following is true about both a perfectly competitive market and a market with a monopolist who is able to achieve perfect price discrimination a. Deadweight loss is equal to zero. b. Profit is maximized where price is equal to average total cost. c. The marginal revenue curve is downward sloping. d. Average fixed cost remains constant as quantity increases.

Suppose that the wheat market in Ghana is a perfectly competitive one where all the firms...

Suppose that the wheat market in Ghana is a perfectly competitive one where all the firms are identical with identical cost curves. Again, suppose that a single firm’s total cost (TC) function is given as TC = 100 + q2 + q where q is the quantity of output produced by the firm. Furthermore, the market demand function for this product is given by the equation Q = 500 – 0.5P, where Q is the market quantity demanded. Also, the...

1. Which of the following is true for a firm in a perfectly competitive market? Its...

1. Which of the following is true for a firm in a perfectly competitive market? Its short-run supply curve is the average variable cost curve. Its short-run supply curve is vertical. Its short-run supply curve is negatively sloped. Its short-run supply curve is the marginal cost curve above the average variable cost curve. 2. A ________ cost is one that is incurred once and cannot be recovered, such as painting a sign on a building. sunk marginal fixed variable 3....

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be...

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case? A. Jessica, a chocolate seller, sometimes sets her price lower or higher than the price at which other sellers sell their chocolates. B. Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price. C. Terry uses soy milk for producing his chocolates, while Donna uses almond milk for producing...

Suppose the wheat growing industry in the US is perfectly competitive and there is free entry...

Suppose the wheat growing industry in the US is perfectly competitive and there is free entry in the long run. the market demand function is Qd= 580 -4p, which is measured in tons per month. each producer in the industry has a fixed cost of $400 and a variable cost function given by VC=q^2 +5q, where q is the output of an individual producer. a)calculate the long run market equilibrium price and quantity. How many firms are there in the...

Which of the following is NOT a characteristic of a perfectly competitive market? A. An individual...

Which of the following is NOT a characteristic of a perfectly competitive market? A. An individual producer can lower the market price if it is advantageous for him/her B. Suppliers are price takers C. Neither producers nor consumers are price takers D. Demanders are price takers.

Suppose there is a perfectly competitive market for curry puffs. The perfectly competitive equilibrium price in...

Suppose there is a perfectly competitive market for curry puffs. The perfectly competitive equilibrium price in this market is RM5 per puff. The perfectly competitive equilibrium quantity is 5,000 curry puffs. (a) Using a diagram, illustrate the perfectly competitive equilibrium in the market for curry puffs. Clearly label the areas of consumer surplus, producer surplus, and social surplus at this equilibrium. [3 marks] (b) Suppose that the government introduces a price floor for curry puffs at RM7 each. Note: Use...

Which of the following are true with regard to profit for a perfectly competitive firm? A....

Which of the following are true with regard to profit for a perfectly competitive firm? A. Zero economic profit encourages firms to continue producing B. Positive economic profit encourages existing firms to exit the industry C. Negative economic profit encourages firms to raise the price D. Zero economic profit encourages firms to shut-down temporarily

A perfectly competitive market exists for wheat. The inverse demand is P = 200 − Q...

A perfectly competitive market exists for wheat. The inverse demand is P = 200 − Q where P is the price of wheat and Q is the total quantity of wheat. The private total cost for the unregulated market is C = 50 + 80Q + 0.5Q2 . The production of wheat creates an externality where the total external cost is E = 0.5Q2 . (a) Solve for the unregulated competitive equilibrium of wheat and the socially optimal level of...

Question