If an industry is perfectly competitive, then a single producer is a price taker? Why? Explain with examples.
Yes it is correct to say that a single producer is a price taker when the industry is perfectly competitive because by definition a perfectly competitive market is one in which no single firm has influence either on the equilibrium price of the market or the total quantity supplied in the market. Thus, a firm entering the market operating in a competitive market has no incentive to supply at a price lower than market ...view middle of the document...
- If a fim makes a loss in the short run, then it would shut down? If no, discuss. If yes, discuss. Offer examples
First and foremost we need to recognize what a misfortune speaks to. On the books, a bookkeeping misfortune implies that the firm spent more cash than it got. What's more, recollect that this misfortune is normally reported after the occasion has happened - as a rule 30-60 days after the operational cycle, or datebook/financial year. All things considered, much the same as reporting a benefit, it may have next to no significance from an operational viewpoint. The genuine estimation from a money related angle that we are occupied with is cash flow. Does the firm can build money from its operations and pay its bills in the short run? Does it can acquire to take care of transient expenses as it is gathering money for its utilization? These are the critical things which a firm needs to see before shutting its entryways. Further, does it can build its business, while controlling its expenses to set up a practical plan of action? A couple of samples will outline this idea. It took AOL 13 years to report its first benefit, yet it continued working at a "Misfortune", however making income to keep up its operations until this was accomplished.