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1. Perfectly Competitive Market Model a. Draw a diagram depicting the perfectly competitive market for aspirin....

1. Perfectly Competitive Market Model

a. Draw a diagram depicting the perfectly competitive market for aspirin.

b. Identify the equilibrium price and quantity.

c. Define consumer surplus. Identify the area of consumer surplus of the graph, provide reference points, and label it.

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Answer #1

1. Perfect competition is a firm in which there are-

  • large number of sellers and buyers
  • price is decided by the market forces that is demand and supply
  • there is no barrier to entry and exit in the market
  • Let us draw the demand and supply in perfect competition .

Theoretical speaking consumer surplus is the difference of what consumer willing to pay and what he actually pays for any good and services

consumer surplus is represented by a triangle in the shaded area represented below in the diagram below-.

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