Question

1 what does it take to have a perfectly competitive economic situation ?explain briefly 2 identify...

1 what does it take to have a perfectly competitive economic situation ?explain briefly

2 identify stages of production why a firm will not produce either in stage 1 or stage 3 explain briefly

3 how do average physical production (APP} and marginal physical product (MPP) differ?can APP be rising while MPP is falling? why?

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Answer #1

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A perfectly competitive economic situation will be achieved when there will be perfect information being shared in the economy and the firms will be price takers. In this scenario, the products sold by the firms will be identical in nature and they will earn zero economic profit in the long run. In this economic scenario, there will be a productive as well as allocative efficiency in the economic scenario or in the market. Further, in this economic scenario, firms will make free entry and exit from the market.


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