Asked by Sarah Bryan on May 13, 2024
Verified
Statement I.Under perfect competition the firm's demand curve is set by industry-wide supply and demand.
Statement II.The perfect competitor's short-run and long-run situations are identical.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Industry-Wide Supply and Demand
The total quantity of goods and services that are available for purchase across an entire industry, alongside the total quantity that consumers are willing and able to buy within that industry.
Short-Run
A period in economics where at least one factor of production is fixed, and firms can't alter all inputs.
Long-Run
A period in economic theory during which all factors of production and costs are variable, allowing for full adjustment to changes.
- Analyze the distinction between immediate and prolonged operational strategies and their effects on firms in a perfectly competitive environment.
- Outline the features of the demand curve that perfectly competitive firms deal with and its impact.
Verified Answer
TS
Telmo SantosMay 19, 2024
Final Answer :
A
Explanation :
Statement I is true because in a perfectly competitive market, individual firms are price takers, meaning the price is determined by the overall supply and demand in the industry, not by the individual firm. Statement II is false because in the short run, firms may not be able to adjust all inputs, leading to potential profits or losses, while in the long run, firms can adjust all inputs and will enter or exit the market until economic profits are zero.
Learning Objectives
- Analyze the distinction between immediate and prolonged operational strategies and their effects on firms in a perfectly competitive environment.
- Outline the features of the demand curve that perfectly competitive firms deal with and its impact.