Wages affect a competitive firms supply curve

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1. If a perfectly competitive firm raises its price above the prevailing market rate, how much of its sales might it lose? Why? Can a competitive firm ever raise its prices? If so, when?

2. How does an employer-paid Social Security tax on wages affect a competitive firm’s supply curve?

3. Why wouldn’t producers necessarily want to produce output at the lowest average cost? Under what conditions would they end up doing so?

4. What industries do you regard as being highly competitive? Can you identify any barriers to entry in those industries?

Reference no: EM13734245

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