Reference no: EM131483490

These questions require complete understanding of interactions between production and profit maximization. Be careful with the IF-THEN statement.

If a competitive firm minimizes its cost of production subject to output, it then maximizes economic profit. True or false and explain in detail using an example.

Question 1: In an oligopolistic market, firms pay close attention to the strategies of their rivals. In monopolistic competition, with a large number of sellers, it is assumed that there is not this kind of rivalry, or interdependence. Why is there probably some rivalry in many monopolisticallycompetitive markets? You also must cover the oligopolistic market.

Question 2: You own a fresh vegetable stand. Last week you decided to raise your carrot prices from 79 cents per bunch to 99 cents per bunch. Subsequently, you noticed that several of your regular customers were buying 2 bunches instead of their usual one. In fact, your carrot sales had gone up appreciably. When you finally asked one of your customers why she was buying so many carrots, she replied, "My neighbor told me that you had recently raised your price because carrots were in short supply, and that I ought to stock up before you ran out." Does this contradict the law of demand? Why or why not? Justify your answer.