1.What will happen to the price in a competitive market in the long run? Draw a...

1.What will happen to the price in a competitive market in the long run? Draw a graph of the entire market (all firms versus all consumers) to illustrate why this happens.

a.What are the characteristics of a competitive market?

b. With the market back at market equilibrium, what is the consumer response given that a single firm raises its price above the equilibrium price?

c.If a firm finds out that there are a lot of consumers willing to buy the good if they lower their price below the long-run market equilibrium price, will they do so? Why or why not?

d. How would a price rise initiated by most of the firms in a market cause a different response than that of a single firm, as depicted in part b?

Expert Solution

Rahul Sunny answered 7 months ago

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