a) All the firms in the perfectly competitive market structure are the price takers while the price is fixed by the industry through the forces of price mechanism. The diagram below indicates the equilibrium state for the Bottled Water market and each individual firm: Figure A represents market demand curve, while Figure B represents demand curve of an individual firm in the perfectly competitive market
b) At the announcement of tap water being toxic, the market for Bottled Water will see a positive change in the demand figures and as a result, the demand curve will shift rightwards. On the other ...
