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Question: According to the definition, a perfectly competitive firm cannot affect the market price by any changing only its own output. Producer No. 27 in problem 2 decides to experiment by producing only 8 units.

a. What happens to the market price?

b. Calculate the elasticity of demand facing Producer No. 27 for its own output.

c. What happens to Producer No. 27's revenue as a result of cutting output?

d. Experiment to find the approximate number of firms that must agree to cut their output by 2 units apiece before it becomes profitable for them to do so as a group. Might the reduction in output fail to raise profits even if all firms in the market agree to make such a cut? Explain.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M93111282

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