Question

Identify the truthfulness of the following statements: The model of perfect competition provides a good approximation for competition in markets with a small number of competing firms. In a perfectly competitive market, firms sell differentiated products. Group of answer choices The market for limes is perfectly competitive. There are 54 identical firms selling limes in the market. Each firm's supply is given by the function, Q firm = 4 Р - 1 12 What is the total quantity of limes supplied into the market (in kilograms) when the market price is $6 per kilogram?

Answer 1

The concept of perfect competition is characterized by many firms producing identical products and does not apply well to markets with few competitors. Firms in a perfectly competitive market sell identical, not differentiated, products. Given the supply function Qfirm = 4P - 112 for 54 firms, a calculation is made for the price of $6 resulting in a negative quantity, which is not feasible.

Step-by-step explanation:

The model of perfect competition does not provide a good approximation for competition in markets with a small number of competing firms, as it requires a large number of firms producing identical products. In a perfectly competitive market, firms do not sell differentiated products; rather, they sell products that are essentially the same.

Considering a market with 54 identical firms selling limes and each firm's supply function given by Qfirm = 4P - 112, we can calculate the total quantity of limes supplied into the market when the price is $6 per kilogram. Substituting P with 6 in the equation: Qfirm = 4(6) - 112 = 24 - 112 = -88. Since the quantity supplied cannot be negative, this indicates an error in either the given supply function or the price being considered. Assuming the firm only supplies when the price is above a certain level (in this case, when Qfirm becomes positive), we would need to re-evaluate the valid market prices.