The short run supply curve for a purely competitive industry can be found by: a)
ID: 1121720 • Letter: T
Question
The short run supply curve for a purely competitive industry can be found by: a) multiplying the AVC curve of the representative firm by the number of firms in the industry. B)Adding horizontally the AVC curves of all firms c) summing horizontally the segments of the MC curves lying above the AVC curve for all firms d) adding horizontally the immediate market period supply of each firm.
Using the graph, what is the difference between purely competitive and pure monopolist output at the industry level. A)0 b)35 c)70 d)105.
The socially efficient level of production occurs where the marginal cost curve intersects which of the following curves a)AVC b)MR c)Demand
Firms should hire as long as a) wage is equal to the marginal product of labor b) wage is equal to the price of output times marginal cost product of labor c) wage is above the marginal product of labor. d) none of the above.
Explanation / Answer
1.
The short-run supply curve for a purely competitive industry can be found by summing horizontally the segments of the MC curves lying above the AVC curve for all firms.
This is because the supply curve of the purely competitive firm is the portion of MC curve which lies above the AVC curve.
Therefore for calculating the short-run supply curve for a purely competitive industry, we need to add the horizontally the segments of the MC curves lying above the AVC curve for all firms.
Therefore the correct answer is option C.
2.
The monopolist profit-maximising quantity is determined by the intersection of the MR and MC curve while the perfectly competitive firm profit-maximising quantity is determined by the intersection of Price and MC curve.
Therefore the difference between purely competitive and pure monopolist output at the industry level will be
=160-90
=70 units.
Hence option c is the correct answer.
3. The pure competitive firm supply goods only when the price is greater than the average variable cost.
The pure competitive firm in the graph will not produce unless price equals at least average variable cost.
As it can be seen in the graph, that the supply curve of the purely competitive firm is the portion of MC curve which lies above the AVC curve.
Here MC and AVC are equal at price $5.
Hence option b is the correct answer.
4.
The socially efficient level of production condition are;
MC=Demand
The socially efficient level of production occurs where the marginal cost curve intersects demand curve.
Hence option c is the correct answer.
Option c is; demand
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