Graphically derive the long run demand curve in a competitive factor market and explain the...
Question:
Graphically derive the long run demand curve in a competitive factor market and explain the underlying theory.
Competitive Market:
The demand(DD) curve shows the different combinations of price and quantity demanded(QD). The demand(DD) of a competitive market is a type of market that sells homogeneous goods. The competitive firms are price-takers. In a market that is competitive, there is free entry and free exit in a competitive market. For a competitive firm, the profit-maximizing condition is that the marginal cost(MC) should be equal to the marginal revenue. The marginal cost(MC) is the additional cost that the producer has to pay to produce an extra unit of output. The marginal revenue is the additional revenue that is earned from producing an extra unit of output. Factors of production are considered to be the inputs of the production. The price of the factors is the cost of the production. The resources are fixed or constant.
Answer and Explanation: 1
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View this answerIn a production process, the producer changes one input by keeping the other inputs constant in the short run. Thus, in the short run, the producer...
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Factor Market | Overview & Examples
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Chapter 58 / Lesson 6
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Learn the factor market definition and find out what is a factor market. Compare and contrast factor market vs. product market and see some factor market examples.
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