Perfectly competitive industry is initially in a short-run

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Q1. Why would a firm in a perfectly competitive marketplace choose not to set its price below the going price? If a firm did set its price below the going price, Illustrate what effect would this have on the marketplace?

Q2. A perfectly competitive industry is initially in a short-run equilibrium in which all firms are earning zero economic profits but are operating below their minimum efficient scale. Elucidate the long-run adjustments that will create equilibrium with firms operating at their minimum efficient scale. Why is a perfect competitive firm associated with efficiency for both customers and businesses?

Reference no: EM1317743

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