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Chapter 23: Q. 2FCT (page 529)

Why are we unable to conclude that large numbers of entries into and exits from all U.S. industries imply that all the industries are perfectly competitive? (Hint: What are the other characteristics of perfect competition?)

Short Answer

Expert verified

The vendor shouldn't show prick and choose method in acceptingthe worth of the commodity.

Step by step solution

01

Introduction

The first condition is thatthe amount of buyers and sellers must be so large that none of them individually isduring a position to influencethe worth and output of the industry asa full.within the market the position of a purchaser or a selleris simply sort of a drop of water in an ocean.

02

Given Information

Each firm should produce and sell a homogeneous product so no buyer has any preference for the merchandise of somebody seller over others. If goods are homogeneous then price also will be uniform everywhere.

03

Explanation

The firm should be liberal to enter or leave the firm. If there's hope of profit the firm will enter in business and if there's profitability of loss, the firm will leave the business.

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Most popular questions from this chapter

Why might firms that hire mostly untrustworthy people struggle to provide as much output in a competitive market as firms that attract and retain mostly honest individuals?

Take a look at Figure 23-3. This figure uses the data in the table from Figure 23-2, which indicates that the area of the blue rectangle displaying hourly economic profits is $5 per period. What prevents this firm from continuing to produce the same number of units per hour but raising the price that it charges for each unit in order to enlarge the area of the profit rectangle?

If the price of a particular rare earth were actually to drop below its original level following entry of new firms even as market demand continued to increase, what type of industry would exist?

Consider a market for online movie rentals. The market supply curve slopes upward, the market demand curve slopes downward, and the equilibrium rental price equals $3.50. Consider each of the following events, and discuss the effects they will have on the market clearing price and on the demand curve faced by the individual online rental firm.

a. Peoples tastes change in favor of going to see more movies at cinemas with their friends and Family members.

b. More online movie-rental firms enter the market.

c. There is a significant increase in the price to consumers of Purchasing movies online.

Suppose that the firm with the costs and revenues tabulated in Figure 23-2 is contemplating whether to produce 12 units of output. If it were to produce this many units, what (if anything) would happen to the market price? What would be the firm's marginal revenue for the 12th unit produced? What would be the firm's total revenues per hour?
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