1. List and briefly describe the main characteristics of a perfectly competitive market. 2. Graphically show...

1. List and briefly describe the main characteristics of a perfectly competitive market.

2. Graphically show a perfectly competitive firm who is earning a short run profit. Is this possible in the long run? Why/why not?

3. Graphically show a perfectly competitive firm that is losing money in the short run but who should continue producing.

4. Make-up a numerical example showing why it is often rational for a perfectly competitive firm to stay in business in the short run even though they may be losing money.

5. Can a perfectly competitive firm earn long run profits? Why/why not

6. If breaking even (zero economic profit) is the only long run outcome possible for a perfectly competitive firm, why would anyone enter such a market?

Expert Solution

Last one is answer to question 6 not 5

Answer to 5 is given along with graph

Rahul Sunny answered 2 years ago

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