Purchase Solution

3 Management decisions for a perfectly competitive firm

Not what you're looking for?

Ask Custom Question

1. Should a perfectly competitive firm making a loss in the short-run always leave the market? Why or why not? What about in the long-run?

2. Should a perfectly competitive firm advertise in an effort to increase its sales and its profits? Why or why not?

3. Can you think of an example of a perfectly competitive firm? Why do you think this firm is perfectly competitive?

Purchase this Solution

Solution Summary

This solution addresses three decisions that must be made by the manager of a perfectly competitive firm:
1. Should a loss-making firm leave the market?
2. Can a perfectly competitive firm increase its revenues by advertising?
3. What is an example of a perfectly competitive firm, and why?

Solution Preview

1. No. If the market price falls to a point where a perfectly competitive firm is making a loss, it should shut down temporarily to minimize its losses in the hope that the market price rises again. If the price does not rise in the long run, then the firm should leave the market.

2. No. The goal of ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.