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January 25, 2023

FIRM COST STRUCTURE AND PERFECTLY COMPETITIVE MARKETS

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Using the definition and characteristics of perfectly competitive industries, explain why—in the long run—firms earn zero economic profits. Does this mean that competitive firms earn zero accounting profits? Your response should be at least 75–150 words (1–2 paragraphs) in length.

Joe’s Widget Factory operates in a perfectly competitive industry. Joe’s fixed and variable costs are given in the table below. He is a price taker and can sell as many widgets as he produces for $10 each. Complete the table using the provided link and respond to the following questions. Besides referring to your table to support your answers, include references from the course materials on profit-maximizing rules for competitive firms. Your response should be at least 75–150 words (1–2 paragraphs) in length, including table.

What is the profit maximizing (or loss minimizing) level of output in the short run?

What is the profit maximizing level of output in the long run?

What are the shut-down prices in the short run and long run?

What is the firm’s supply curve?

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