What should Perfect competitive firm do in the short run
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Homework Assignment 4
Answer all Questions
1. What should Perfect competitive firm do in the short run if
(i) The price is above ATC
(ii) The price is less than ATC but above AVC
(iii) The price is less than AVC
(Illustrate it graphically too if you can)
2. At what price does the following market structures, a firm would sell its products?
a. Perfect competitive market
c. Monopolistic competition
3. At what quantity a firm, regardless of market structure, produces to maximize profit?
4. (i) What is resource allocative efficiency?
(ii) Under what market structure a firm is said to have achieved resource allocative efficiency? Why?
(iii) Which ones that cannot? Why?
5. Why a monopolistic competitor operates at excess capacity?
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