When firms exit a perfectly competitive industry, the market supply curve shifts to the left.10/4/2023 ![]() ![]() ![]() ![]() Therefore, to maximize profit, a firm should produce the quantity of output where the difference between total revenue and total cost is as large as possible.Īnswer: Total revenue divided by the QuantityĪnswer: the change in total revenue from selling one more unit of a product Economists assume that the objective of such firms is to maximize profit (total revenue minus total cost). Perfectly competitive firms should produce the quantity whereĪnswer: Answer: Perfectly competitive firms cannot control price and are consequently price takers. How should firms in perfectly competitive markets decide how much to produce? There are no barriers to entry into the market. There can be no verifiable difference between the goods and services sold under perfect competition.ģ. Each individual buyer and seller is small relative to the entire market, and, as a result, cannot affect the market price.Ģ. What conditions make a market perfectly competitive?Īnswer: 1. ![]()
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