2 Nd Hw

Subject 6.
1.Define the Perfect Competition.
Perfect Competition is an exertion structure in which in that location argon many firms, apiece small relative to the industry, producing virtually identical products and in which no firm is large enough to have any discipline over prices. In perfectly competitive industries, new competitors rump freely throw in and exist the market.
Large number of firms
superposable product
Full information
No obstacles to entry or exit


2.Define slight running and Long Run in production. (P. 135)
(a)Short Run: The period of time for which two conditions hold: The firm is direct under a intractable scale (fixed factor) of production, and firms cajn neither inscribe nor exist an industry.
(b)Long Run: That period of time for which there are no fixed factors of production: Firms can extend or belittle scale of operation, and new firms can enter and existing firms can exit the industry.

3.Discuss the major items of the furbish up Costs. (Definition and examples) (P. 152)
Fixed cost is any cost that does not depend on the firms level of output. These costs are incurred even if the firm is producing nothing. There are no fixed costs in the long run, i.e.



,
Rent on 5-10 twelvemonth commercial lease,
Specialized machineries
Salaries of high echelon managers
Licenses and permits


4.Each sub-question of (a) to (e) is treated as a separate question.
(a)In a diagram, draw as clearly as possible the following cost curves in the short run under perfect competition: AFC, AVC, ATC, MC



(b) absorb the major characteristics of these curves in (a)
AFC (Average Fixed Cost)
AVC (Average Variable Cost)
ATC (Average Total Cost)
MC (Marginal Cost)

(AFC is downward sloping and it is continuously declining without minimum point. However, it would not be zero or negative, because AFC = TFC/q. While TFC remains the same, when the quantity increase, AFC decrease closing to zero but not touch.
The curves of MC, ATC and AVC are...If you want to foreshorten a full essay, order it on our website: Orderessay



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