1-According to Miller, the price taker refers to a situation in which a company must accept the prevailing prices in the market of its products because the firm cannot influence the price (Miller, R. L. 2012). In other words, when there is competition, a firm must set the price of its product below the competitive price in order to obtain customers, but when the price is above the competitive price, customers will not buy that product. According to the author, the perfectly competitive model is built on several assumptions:
There are many buyers and sellers on the market and one single buyer or seller cannot influence the price because they represent a small fraction of all the purchases.
The items sold by the sellers are homogenous, meaning …show more content…
In this case, the firm does not make any profit because the explicit cost and the implicit cost are same. A firm would be willing to operate permanently at this price because a firm can have zero economic profit, but the accounting profit will still be positive (Miller, R. L. 2012).
3-According to miller, price discrimination refers to a situation in which a given product can be sold at more than one price (Miller, R. L. 2012). In other words, in price discrimination the seller charge different price to different group of buyers for the same product. So in this case, we can say that the bistro is practicing price discrimination, because many people go to restaurant for dinner than lunch and according to the law of demand, when the demand increase, the price also increase.
4-Social cost of a monopoly refer to a situation where a monopoly who has control on the supply can charge the highest price that consumers are willing to pay. This situation usually occur when there no substitute for a product. In monopoly, the firms usually make high profit greater than zero economic profit, but it still undesirable make structure because it can lead to a low quantity produced and a high
There are many buyers and sellers on the market and one single buyer or seller cannot influence the price because they represent a small fraction of all the purchases.
The items sold by the sellers are homogenous, meaning …show more content…
In this case, the firm does not make any profit because the explicit cost and the implicit cost are same. A firm would be willing to operate permanently at this price because a firm can have zero economic profit, but the accounting profit will still be positive (Miller, R. L. 2012).
3-According to miller, price discrimination refers to a situation in which a given product can be sold at more than one price (Miller, R. L. 2012). In other words, in price discrimination the seller charge different price to different group of buyers for the same product. So in this case, we can say that the bistro is practicing price discrimination, because many people go to restaurant for dinner than lunch and according to the law of demand, when the demand increase, the price also increase.
4-Social cost of a monopoly refer to a situation where a monopoly who has control on the supply can charge the highest price that consumers are willing to pay. This situation usually occur when there no substitute for a product. In monopoly, the firms usually make high profit greater than zero economic profit, but it still undesirable make structure because it can lead to a low quantity produced and a high