Competitiv?e markets

    Competitiv?e markets
    A perfectly competitive firm is currently maximizing profits. Prices of raw materials used in production increase.
    Briefly summarize the initial market effects.
    Describe what will happen to this firm’s production (and most importantly why). Focus on the reasoning as to why the changes in costs and production occur. That is, why was the firm producing where it was producing, why does the firm change its output, and then why do costs change as a result of the change in output. Describe what will happen and why to the firm’s average fixed costs, marginal costs, average costs, and profits as the firm makes its choices.
    Summarize what will happen in the market in the long run. Discuss the changes that will occur in the long run for the firm and outline why. You do not need to discuss why each cost concept changes here, but do explain why the firm makes the decisions that it does. Include an explanation of the importance of whether or not overall costs change as the industry expands or contracts.
    (You do not need to explain the logic of why the market price and quantity may or may not change, just summarize. Focus on the decision-making of a typical firm in the short run and in the long run. Focus on your logic.)

     

     
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