MT445 Unit 4
Please answer the following questions. Submit as a Microsoft Word® document to the Dropbox when completed.
1. How does the demand curve faced by a perfectly competitive firm differ from the market demand curve in a perfectly competitive market? Explain.
The market demand curve will slope downwards, while the demand curve for the individual firm is flat or perfectly elastic, reflecting the fact that the individual takes the market price as given. The difference in the slopes of the market demand curve and the individual firm 's demand curve is due to the belief that each of the individual firms is small in size. No matter how much output one company provides, it will not be able to affect the market price. Note that the individual firm 's equilibrium quantity of output will be completely determined by the amount of output the individual firm chooses to supply (Cliffnotes.com, 2012).
2. A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is $140. Output FC VC TC TR Profit/Loss 0 $90 $ 0 _90__ __0_ _-90__ 1 90 90 _180__ _140__ _-40__ 2 90 170 _260__ _280__ _20__ 3 90 290 _380__ _420__ __40_ 4 90 430 _420__ _560__ __140_ 5 90 590 _680__ _700__ _20__ 6 90 770 _860__ _840__ __-20_ a. Complete the table.
b. What level of output should the firm produce to maximize profits? 4 units
3. How does the demand curve faced by a monopoly differ from the demand curve faced by a perfectly competitive firm? Explain.
A monopolist is the market 's only supplier; the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve means that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output (Cliffnotes.com, 2012). The demand
1. How does the demand curve faced by a perfectly competitive firm differ from the market demand curve in a perfectly competitive market? Explain.
The market demand curve will slope downwards, while the demand curve for the individual firm is flat or perfectly elastic, reflecting the fact that the individual takes the market price as given. The difference in the slopes of the market demand curve and the individual firm 's demand curve is due to the belief that each of the individual firms is small in size. No matter how much output one company provides, it will not be able to affect the market price. Note that the individual firm 's equilibrium quantity of output will be completely determined by the amount of output the individual firm chooses to supply (Cliffnotes.com, 2012).
2. A perfectly competitive firm has the following fixed and variable costs in the short run. The market price for the firm’s product is $140. Output FC VC TC TR Profit/Loss 0 $90 $ 0 _90__ __0_ _-90__ 1 90 90 _180__ _140__ _-40__ 2 90 170 _260__ _280__ _20__ 3 90 290 _380__ _420__ __40_ 4 90 430 _420__ _560__ __140_ 5 90 590 _680__ _700__ _20__ 6 90 770 _860__ _840__ __-20_ a. Complete the table.
b. What level of output should the firm produce to maximize profits? 4 units
3. How does the demand curve faced by a monopoly differ from the demand curve faced by a perfectly competitive firm? Explain.
A monopolist is the market 's only supplier; the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve means that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output (Cliffnotes.com, 2012). The demand
References: Cliffnotes.com. (2012). Demand in perfectly competitive markets. Retrieved from http://www.cliffsnotes.com/study_guide/Demand-in-a-Perfectly-Competitive-Market.topicArticleId-9789,articleId-9763.html Adams, W., & Brock, J. (1991). Antitrust economics on trial : Dialogue in new . Directions for Submitting your Assignment Complete your assignment in this Microsoft Word® document and save it as Username-MT445Assignment-Unit#.doc (Example:TAllen-MT445Assignment-Unit4.doc). Submit your file by selecting the Unit 4: Assignment Dropbox by the end of Unit 4.