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(PDF) Business and Economics Researches

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Added on  2021-05-30

(PDF) Business and Economics Researches

   Added on 2021-05-30

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Running head: BUSIENSS ECONOMICSBusiness EconomicsName of the universityName of the studentAuthor Note
(PDF) Business and Economics Researches_1
1BUSIENSS ECONOMICSTable of ContentsAnswer 1:...................................................................................................................................2Answer 3:...................................................................................................................................4Answer 5:...................................................................................................................................5Answer 6:...................................................................................................................................7Answer 9:...................................................................................................................................8References:...............................................................................................................................10
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2BUSIENSS ECONOMICSFirmIndustryPricePrice OOutputOutputP0P0ACMCDSQfQeAnswer 1:a. The market structure, which is used to benchmark allocative efficiency, is perfectcompetition. The chief reason is that when a market holds conditions of perfect competition,then it can obtain equilibrium at current price when quantity supplied for each good orservice equates with the quantity demanded (Decker, Haltiwanger, Jarmin & Miranda, 2017).This equilibrium can be referred as a Pareto optimum, which means, no one can be better offthrough exchange without making another one worse off. Hence, the allocative efficiencyoccurs at an output level when the price and marginal cost (MC) of production equates witheach other, that is, P = MC.Figure 1: Allocative efficiency under perfect competitionSource: (created by author)According to figure 1, the firm is producing at an allocative efficient when output isQf. This is because at this output level, price and marginal cost are equal. Hence, industryunder this perfectly competitive market get allocative efficiency at the same price level, whendemand or utility of consumer and supply or marginal cost of industry equate with each other.
(PDF) Business and Economics Researches_3
3BUSIENSS ECONOMICSPriceATCMCOutputOQePeD= ARMRPfb. Monopolistically competitive firms cannot achieve allocative efficiency because they canincrease their price for goods above their marginal cost related to production, this means,P>MC (Jaef & Roberto, 2018). Consequently, this market structure attains allocativeinefficiency as the market power of a monopolistically competitive market can reduce theamount of consumer surplus through increasing price. Moreover, suppliers produce theiroutput below the capacity level. Figure 2: Allocative inefficiency under monopolistically competitive marketSource: (created by author)In the above figure, firm cannot achieve product efficiency because price (Pm) isgreater than minimum average total cost (ATC) curve, that is, P > ATC. Moreover, price isalso high compare to its marginal cost (MC), that is, Pm > MC. On the other side, efficientallocation can be achieved at Pf price. Answer 3:a. Within a market, a single seller enjoys the monopoly power to charge any price higher thanits marginal cost. In other words, the seller can produce relatively low level of output orcharging higher amount of price than its marginal cost (Holmes, Hsu & Lee, 2014). In
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