Question

refer to the table, which shows the demand schedule facing a monopoly widget producer. price per widget quantity of widgets demanded $15.00 0 $12.00 1 $9.00 2 $6.00 3 $3.00 4 if there are no fixed costs, and the marginal cost of producing a widget is constant at $9 per widget, what will the price be in a perfectly competitive market?

Answer 1

In a perfectly competitive market, the price per widget would be set at the marginal cost of production which is $9, as long-run equilibrium forces the price to equal marginal cost.

Step-by-step explanation:

In a perfectly competitive market, price is determined by the intersection of the supply and demand curves. For the widget producer in question, if the marginal cost of producing a widget is constant at $9 per widget, and there are no fixed costs, then the price in a perfectly competitive market would be where the marginal cost equals the market demand. Since the marginal cost is $9, and assuming no price discrimination, the monopolist is forced to behave like a competitive firm by setting the price equal to marginal cost in long-run equilibrium. Therefore, the price per widget in a perfectly competitive market should be $9.