In: Economics
7.7. You are a business manager working for a firm in a purely
competitive market and you just hired a summer intern who does not
understand how to derive the firms’ short run supply curve from the
firms’ marginal cost curve.
a. Please explain to the intern how the
short run supply curve is derived from the firm’s marginal cost
curve. Be specific.
b. Please explain to the intern the
characteristics of long run equilibrium of a purely competitive
firm and how operating in a purely competitive market might impact
the decision-making of the firm. Please include the implications of
long-run equilibrium for productive and allocative efficiency.