3.(W8LO1, LO2). Lin\'s makes fortune cookies. Anyone can make and sell fortune c

Question

3.(W8LO1, LO2). Lin's makes fortune cookies. Anyone can make and sell fortune cookies, so there are dozens of producers. All fortune cookies are the same and buyers and sellers know this fact. Par I. Lin's fortune cookies operates in a market. A. noncompetitive B. perfectly competitive C. challenging D. monopolistic Part 2. The price of a fortune cookie is determined by cookie equals A. the ingredients that Lin's uses to produce his fortune cookies; average total cost B. the number of cookies that Lin's produces; average variable cost C. market demand and market supply; price D. the freshness of the fortune cookies; average fixed cost Lin's marginal revenue from a fortune Part 3. Lin's makes fortune cookies that are identical to those made by dozens of other firms, and there is free entry in the fortune cookie market. Buyers and sellers are well informed about prices. If fortune cookies sell for $10 a box and Lin offers its cookies for sale at $10.50 a box, Lin sells

Explanation / Answer

1. b

In perfectly competitive market there are large number of sellers and buyers hence firm is a price taker not price maker there is also homogeneous good.

2.c

In a perfectly competitive market equilibrium condition is that P =MR. Price is determined by the intersection of supply and demand curve of goods .

3.a

In a perfectly competitive market a firm is a price taker and if he increases its price it doesn't mean that he can sell his product at that price because sellers and buyers are well informed hence buyers will buy the product where the prices will be less.

4.D

If prices will be less than the equilibrium price his competetor would buy his good from him and sell it in the market at equilibrium price and hence gain a lot of profit.

thanks

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