perfectly competitive seller of potatoes which curves shift? which do not? why?

The Shifts of a Perfectly Competitive Seller of Potatoes: Which Curves Shift, and Why?

In the world of economics, perfectly competitive sellers operate in markets where there are many buyers and sellers, and no single firm has the power to influence prices. The potato market is a great example of such an environment. In this article, we will explore which curves shift in response to changes in demand or production costs, and why.

One fundamental concept in economics is the adjustment to changes in the short run. When there is a change in the market, firms may experience economic profits or losses in the short run. These profits or losses will be eliminated in the long run through entry or exit of firms. For instance, if potato farms are experiencing economic losses due to low prices, they may shut down and exit the market until the price rises to eliminate these losses.

A long-run equilibrium can be changed by a change in demand or production costs, which affect supply. If demand increases, for example, more potato farmers may enter the market to meet this increased demand, causing the price to rise. On the other hand, if production costs decrease due to advances in farming technology, firms may increase their output and supply, leading to a drop in prices.

In perfect competition, firms will continue to operate until they reach zero economic profit in the long run. If they are suffering losses, they will exit the market; if they are earning profits, new firms will enter the market. This process ensures that the market price is set at the point where marginal revenue equals average revenue, and marginal cost equals average variable cost.

For a perfectly competitive firm like a potato farm, marginal revenue is equal to price and average revenue. The model of perfect competition suggests how changes in demand or production costs will affect price and output in real-world cases. In the short run, firms maximize profit by producing an output level where marginal revenue equals marginal cost, provided marginal revenue is at least as great as the minimum value of average variable cost.

In conclusion, the perfectly competitive seller of potatoes operates in a market where every decision maker is a price taker. The interaction of demand and supply determines the price, and firms adjust their production levels to maximize profits. Understanding these shifts in curves can help us better comprehend how markets function and respond to changes.

Perfectly competitive seller of potatoes which curves shift? which do not? why?