A firm can adjust along two spectrums: price, and quantity supplied. Describe how the firms below...
A firm can adjust along two spectrums: price, and
quantity supplied. Describe how the firms below would be affected
if they made the assigned adjustments.
a. Perfect
competition, increase in price
b. Monopolistic
competition, increase in price
c. Oligopoly,
decrease in price
d. Monopoly,
increase in quantity supplied, such that it is above
equilibrium
Homework Answers
a) IN a perfect competition if the price increases then the firm will increase the quantity output in the market and produce more.
b) The firm will produce at the point where the MR=MC and increase in price will allow the firm to produce more as the MR will shift to the right.
c) Firm will no change the price as its decision depend on the other firms in the market, it will continue to produce at that point were it was producing.
d) Firm will increase the price to the point were the MR=MC again and there they will maximise the profit.
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A firm can adjust along two spectrums: price, and
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