Discussion Forum: Marketing

1. A single firm in a perfectly competitive market is a price taker? True or False. Explain with examples.

True. A perfectly competitive market is a hypothetical market system that is portrayed by numerous purchasers and sellers, uniform items, no exchange costs, no restrictions to entry or exit, and everyone has the ideal information about the value of goods (Hayes, 2019). A single firm is a price taker as the cost is dictated by the market, not seller, due to many sellers of the same commodity all having the complete information about the product and only a single buyer. This means no one can dictate the price to others, hence a single firm being a price taker. For example, a tomato farmer has to go with the market price as there are several other tomato farmers in the market. If the farmer sells the produce at a high price, he/she will not sell, and the tomatoes will go bad as they perish quickly, while charging less will bring losses. Therefore, the farmer has to use the cost dictated by the market to survive.

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

A perfectly competitive firm’s supply curve is a part of its negligible cost curve that lies over the base of the average variable expense. A perfectly competitive firm augments profit by creating the amount of yield that likens cost and marginal expense. Yes, the market supply curve is different concerning the supply curve in perfect competition. The market supply curve is an upward slanting curve determined by adding the amount providers are eager to deliver when the item can be sold at a given cost. It depicts the price to amount mixture accessible to clients of merchandise and services. In reconciliation with market demand, the market supply curve is essential for deciding the market equilibrium cost and amount.

3. If a firm makes a loss in the short run, then it would shut down? If no, discuss. If yes, discuss it.Offer examples

No.When a firm gets a loss and contemplates closing at that point, it needs to acquire fix cost, which is cost liable for the firm. Therefore, the market cost lies under the average total cost curve yet over the Average Variable Cost (AVC). When value surpasses the AVC, every unit sold creates more income, then the firm should keep on running in the short run. Even when shut down, the firm would gain zero financial benefits and still needs to pay a fixed cost. For example, a restaurant nearby a company has a fixed price of $500 and a variable cost of $500 weekly. If the company staff strikes, the restaurant loses most of its customers, but if the revenue is still more than the variable price, they should continue with the business. If not, they should close down..

4. Does the monopolist have a supply curve? Discuss

No.A monopoly refers to a market where there is only one supplier providing goods to many buyers. The supplier has absolute control over the market hence sets the prices. The supply curve is relevant for a price-taker and not a price-maker like a monopolistic firm. This is because when a firm faces a descending slanting demand curve, there is no unique connection between the cost and the amount it sells. Therefore, it is hard to discover the coordinated relationship between a specific price and the amount offered available to be purchased at that cost. So we can’t find any point on the supply curve. Some examples of global firms believed to be monopolies are Google, Microsoft, among others.

References

Hayes, A. (2019, June 25). Business – Perfect Competition. Retrieved from Investopedia: https://www.investopedia.com/terms/p/perfectcompetition.asp