(SOLUTION) ECON312N Week 3 Discussion: Concepts of Cost Structures under Perfect Competition

Required Resources
Read/review the following resources for this activity:

  • Textbook: Chapter 7, 8
  • Lesson
  • 1 news article
  • Minimum of 1 scholarly source (in addition to the textbook)

Initial Post Instructions
For the initial post, address the following:

  • Locate a news article discussing a social services business failure or closure. Using the concepts in the lesson and Chapter 7, identify the root causes for the failure, examining the short run and long run. Use graphs if necessary.
  • Assume the business was in a perfectly competitive market. How do firms in a perfectly competitive market determine price and profit-maximizing output levels? How did these conditions affect the decision to close?

Follow-Up Post Instructions

Respond to at least one peer. Further the dialogue by providing more information and clarification.

Writing Requirements

  • Minimum of 2 posts (1 initial & 1 follow-up)
  • Minimum of 3 sources cited (assigned readings/online lessons, a news article, and an outside scholarly source)
  • APA format for in-text citations and list of references

SOLUTION

Firms under Perfectly Competitive Market

A perfectly competitive company has got one major decision to put it right, that is, the quantity it needs to produce. The understanding of this concept is with the review of the essential expansion of profit; Profit= (Price) (Quantity produced) − (Average cost) (Quantity produced) – (Greenlaw et al., 2017). Because a business in a perfectly competitive market ought to accept the price level for the said output as dictated by the product’s market supply and demand, it may not choose the special price it charges. Instead, the perfectly competitive business may decide to sell any output as dictated at a special price. This analogy implies that the industry faces a perfectly elastic demand regarding the demand curve on the product (Mankiw, 2016).

Determining Highest Profits

One way of determining the highest profits in a perfectly competitive market is to compare the total cost and the total revenue. A perfectly competitive business may sell as much quantity as it wishes so long as it takes heed to the market price prevailing at a given time. Please click the purchase button to access the entire copy at $5