Question 01

Market structure- Perfect competition

Reason- there are a large number of sellers, corporations may enter and leave the market with
relative ease, items are indistinguishable from one vendor to the next, and vendors are price
takers.
Question- 02
Effect for the sales- When it comes to perfect competition all sellers are price takers. It means
they have to stick with the market price. If they increase the price the seller will not be able to
achieve its sales target because prices of other sellers are relatively cheap compared to him as a
result sale will decrease.
Price elasticity demand consequence- it has elastic demand because according to the scenario we
are discussing about Oliver’s milk not milk as a whole.
Question 06
1. Quantity of Oliver’s milk- the quantity producing has been increased due to increased supply
of the farm gate market.
2. Price of Oliver’s milk- it has been decreased because of the increase of the supply in market.
Oliver is a price taker therefore he has to be stick with the existing marketing price otherwise he
will lose his sales.
3. Economic profit for Oliver’s dairy farm- Economic profits has been increased due to the
increased in production and the cost reduction. This is all because of increase in the supply.
Question 07
Because of the good signal that is sent by the economic profits, more producers will enter the
farm gate milk sector. This is due to the fact that economic earnings generate positive signals.
Once they arrived, prices started to decrease even more, and as a consequence of it, profits
started to decrease as well. As a result of earnings starting to decrease, some companies started to
leave the sector. As a result, throughout the course of a longer period of time, only typical gains
will be seen.
Question 08
It is entirely up to him to decide whether or not the business should close, and having normal
profits or zero profits does not mean that there are no profits; rather, it indicates that he may have
a profit that is sufficient to cover his opportunity cost.
Question 09
 Keep his costs at the minimum level.
 Produce good quality goods
 Adapt newest technology
 Produce more products
 Achieve economies of scales