1.) What are the characteristics of the perfectly competitive market? List and explain. 2.) What is...

1.) What are the characteristics of the perfectly competitive market? List and explain.

2.) What is a firm's short run supply curve?

Solutions

Expert Solution

1.A perfectly competitive market has several important characteristics:

All producers contribute insignificantly to the market. Their own production levels do not change the supply curve.
All producers are price takers. They cannot influence the market. If a firm tries to raise its price consumers would buy from a competitor with a lower price instead.
Products are homogeneous. The characteristics of a good or service do not vary between suppliers.
Producers enter and exit the market freely.
Both buyers and sellers have perfect information about the price, utility, quality, and production methods of products.
There are no transaction costs. Buyers and sellers do not incur costs in making an exchange of goods in a perfectly competitive market.
Producers earn zero economic profits in the long run.

2.The upper portion (rising portion) of the short run marginal cost curve is the short run supply curve.

Rahul Sunny answered 1 year ago

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