under perfect competition market structure how does firm makes prices and output decisions?

Question

subject: Micro economics

Answer 1

under perfect competition firms do not exist. Indeed firms are non market forms of coordination so they should not be allowed under perfect market competition. Under perfect competition structure there are only individual producer.

Besides perfect competition market structure does not exist. So why bother ?

Correct phrasing should then be, under a hypothetic perfect competition market structure, how would an individual producer make price and output decisions ?

Aside from that. The above anwers may be considered correct.

Answer 2

Under perfect competition, firms can't set a price above the market price otherwise they'll sell nothing and if they set a price below it, they'll be swamped, so therefore they sell all that they want to at the marklet price. (that answers how they set the price)

They then work out what quantity maximises their profit at that price. Since marginal revenue is equal to the price, this is where the marginal cost equals the market price.

Answer 3

It really depends on share of the market that top 5 firms hold. If it's over 75%, you have oligopoly, if it's under 50%, it's probably more like competition. I am pretty sure web design is not very concentrated, since it's fairly easy to start a new firm (if you have good people)

Answer 4

Under perfect price competition a firm cannot set a price, but they sell their product at the price level of the market demand curve (where total suppy meets total demand) that is the price level of that good.

Now, they will set their output, where that price level meets their marginal cost curve, i.e. where the cost of their last unit made is the same as the price they can sell that unit for.

equilibrium.