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Zorluk: Çok zorPerfect Competition: Characteristics and Assumptions

Consider an industry operating under conditions where products are standardized, factors of production are freely mobile, and all market participants possess complete information. If an unexpected external shift increases total industry consumer demand, which of the following best describes the immediate impact on an individual producer's demand curve and the subsequent market adjustment required to restore long-run equilibrium?

  1. The producer's horizontal demand curve shifts vertically upward in the short run, generating economic profits that attract new firms until entry shifts industry supply rightward and returns price to minimum average total cost.Cevap
  2. B
    The producer's demand curve becomes downward-sloping in the short run due to heightened market demand, allowing the firm to set marginal revenue above price until long-run price competition resumes.
  3. C
    The producer's demand curve shifts horizontally rightward along the existing price level, increasing total output sold without altering individual short-run firm profitability or market entry.
  4. D
    The producer's demand curve remains unchanged because price mechanisms in competitive markets are administratively fixed to prevent short-run economic profits and entry disruptions.

Cevap

The producer's horizontal demand curve shifts vertically upward in the short run, generating economic profits that attract new firms until entry shifts industry supply rightward and returns price to minimum average total cost.
Under perfect competition, individual firms are price takers facing a horizontal demand curve at the prevailing market price (P=MR=ARP = MR = AR). When industry demand increases, market price rises. This shifts the firm's demand line upward in the short run, generating economic profit (P>ATCP > ATC). Because entry is free and factors are mobile, new firms enter the industry, shifting aggregate supply rightward until price returns to the minimum long-run average cost, eliminating economic profit.

Adım Adım Çözüm

1
Analyze the firm's demand curve structure in a competitive market.
Because each firm is a price taker, its demand curve is perfectly elastic at the market equilibrium price, where P=MR=ARP = MR = AR.
Individual sellers produce a homogeneous product and hold negligible market share.
2
Determine the short-run impact of an increase in industry demand.
The industry demand curve shifts rightward, raising market price from P1P_1 to P2P_2, which shifts the individual firm's horizontal demand curve vertically upward.
Firms take the higher price as given, leading to short-run economic profits (P>ATCP > ATC).
3
Evaluate the long-run adjustment mechanism driven by market assumptions.
Free entry and perfect factor mobility allow new producers to enter the market, expanding aggregate supply until market price falls back to minimum ATCATC.
Entry continues as long as economic profits exist, restoring long-run equilibrium where economic profit is zero.

Anahtar Kavram

Price-Taker Demand Dynamics and Long-Run Market Adjustment
Tahmini Süre:2m 0s
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Konular

Perfect Competition: Characteristics and Assumptions

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