Perfect Compition Profit Calculation

Assume the company above is in a Perfect Competition Industry: If the price of the product is $20 that is sold at, what will be the profits and how many will be sold at that price? Can the company raise the price?
Keith
Asked Jan 06, 2011
One of the central elements in theoretically perfect competition is market controlled prices. If the company raises the price they will immediately price themselves out of the market. If they lower their price they will sell their products at a loss. They can sell all of their product but profits will depend on how close $20 is to Supply/Demand equalibrium. In periods where demand is high and supplies limited the profits will increase and when demand is low and supply is high, they will lose money.
Rob
Answered Jan 07, 2011

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