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Competitive Industry and Perfect Competition

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1. If an industry is perfectly competitive then a single producer is a price taker? Why? Explain with examples.

2. What is the supply curve of a perfectly competitive firm? Is it different from that of the market supply curve? Explain with examples

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1. In a perfectly competitive market, there are many producers. Each producer is a price taker. They cannot influence the market price because each of them is too small. For example the market price is $1.00 and there are 1,000 producers in the market. If a producer increase the price to $1.10, consumers will not buy from this ...

Solution Summary

This solution discusses competitive markets, and defines the conditions for a perfectly competitive industry. It also explains the supply curve of a perfectly competitive firm and how it differs from the market supply curve with examples.