short run equilibrium of a firm in perfect competition under condition of definitional
Answers
PRICE DETERMINATION:
Under perfect competition sellers and buyers cannot decide the price. industry decide the price of The Good. the aggregate supply and aggregate demand in the market together determine the price of the commodity.
Market brings about a balance between the commodities that come for sale and those demanded by the consumers. It means the forces of supply and demand determine the price of the good .
EQUILIBRIUM OF THE FIRM:
the price of a commodity is determined by the market demand and supply under perfect competition. an increase in the price of a product acts as an incentive to increase the production. as a form AIMS at maximizing profit he choses that output which maximizes profits when the form is in equilibrium it has no desire to change it out equilibrium output is explain with the help of the cost and revenue curves of a firm under perfect competition the AR and Mr curves parallel to the x-axis in the above diagram demand curve and the supply intersect at a point is where the price is OP and the equilibrium price is OP and equilibrium demand and supply is OQ.
SHORT RUN EQUILIBRIUM:
forms are in business to maximize profits during short period a firm cannot change which factors that machinery buildings etc it produces more output by increasing variable factor equilibrium output is produced in a short period with short period marginal cost is equal to the short period marginal revenue under these conditions the firm will be in equilibrium when the marginal cost curve cut the marginal revenue curve from below during the short period a firm mein get coupon ola profits normal profit and losses these two conditions necessary for forms equilibrium are:
- MC = MR
- MC curves MR curve from below
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