Answer to Question #192905 in Microeconomics for Mathews Molepo

Question

State any two (2) ways that firms operating under perfect competition can use to increase their profit since they cannot temper with price and quantity. 

Answer 1

Perfect competition:

A perfect competition is a type of competition in the market where there are many producers and consumers are available in the market and no single company can influence their pricing.

In the perfectly competitive market, for maximizing the profit, firm set marginal revenue equal to the marginal cost (MR=MC).

Marginal revenue is the slope of the revenue curve which is also equal to the demand curve. When the price is greater than average total cost, then the firm is making a profit if it is less than the average total cost then it is making a loss.