In perfect competition, when market demand decreases, explain how the price of the good and the output and profit of each firm changes in the short run
What will be an ideal response?
When market demand decreases, the market price of the good falls and the market quantity decreases. Because the price equals marginal revenue, the fall in the price means marginal revenue falls. As a result, each firm moves down its marginal cost curve so each firm decreases the quantity it produces. The firm's economic profit falls (or its economic loss increases). If the firm had been making a normal profit before the decrease in demand, after the decrease the firm incurs an economic loss.
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The table above shows the total product schedule for Rick's Lawn Service, a yard care company. When does the average product of labor equal the marginal product of labor?
A) between the 4th and 5th workers B) at the 5th worker C) between the 5th and 6th workers D) between the 6th and 7th workers E) between 0 workers and the 3rd worker
Equilibrium in a competitive market results in the greatest amount of economic surplus from the production of a good or service
Indicate whether the statement is true or false