Question

In: Economics

When the government sets a ▼(maximum/ minimum) price that exceeds the equilibrium​ price, the result is...

When the government sets a ▼(maximum/ minimum) price that exceeds the equilibrium​ price, the result is permanent excess ▼ (supply/ demand). Producers will produce ▼ (less/more) and consumers buy ▼ (less/more).

For a perfectly competitive​ firm, marginal revenue equals price ▼(average cost/ marginal cost/ price), and to maximize​ profit, the firm produces the quantity of output at which ▼(marginal cost/ marginal revenue/ marginal cost) equals ▼ (price/ average cost)

Solutions

Expert Solution

When the government sets a minimum price that exceeds the equilibrium​ price, the result is permanent excess supply Producers will produce more and consumers buy less.

If floor price is greater than equilibrium ones, then there will be excess supply in market.

For a perfectly competitive​ firm, marginal revenue equals price price, and to maximize​ profit, the firm produces the quantity of output at which marginal cost equals price

Under the perfectly competitive market, Price is equal to Average Revenue. While the output is decided by the firm where P =MC.

Rahul Sunny answered 2 years ago
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