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Chapter 8: Q2 (page 210)

Would independent trucking fit the characteristics of a perfectly competitive industry?

Short Answer

Expert verified

Yes, Independent trucking fits the characteristics of perfect competition.

Step by step solution

01

Perfect Competition Meaning 

It is a market where : large number of buyers and sellers exchange homogenous goods & services, at uniform prices, amidst perfect information.

Entry and exit is easy here.

02

Industry Explanation

Independent Trucking Industry fits the perfect competition characteristics, as :

  • There are many independent truckers, having insignificant influence on market.
  • Entry and exit is easy with a commercial vehicle and driving license.
  • Price per unit distance covered is standardised or uniform. People are aware about this price.

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Most popular questions from this chapter

Productive efficiency and allocative efficiency are two concepts achieved in the long run in a perfectly competitive market. These are the two reasons why we call them 鈥減erfect.鈥� How would you use these two concepts to analyze other market structures and label them 鈥渋mperfect?鈥�

Assuming that the market for cigarettes is in perfect competition, what does allocative and productive efficiency imply in this case? What does it not imply?

1. A computer company produces affordable, easy-to-use home computer systems and has fixed costs of \(250. The marginal cost of producing computers is \)700 for the first computer, \(250 for the second, \)300 for the third, \(350 for the fourth, \)400 for the fifth, \(450 for the sixth, and \)500 for the seventh.

a. Create a table that shows the company鈥檚 output, total cost, marginal cost, average cost, variable cost, and average variable cost.

b. At what price is the zero-profit point? At what price is the shutdown point?

c. If the company sells the computers for \(500, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.

d. If the firm sells the computers for \)300, is it making a profit or a loss? How big is the profit or loss? Sketch a graph with AC, MC, and AVC curves to illustrate your answer and show the profit or loss.

Look at Table 8.13. What would happen to the firm鈥檚 profits if the market price increases to $6 per pack of raspberries?

What is a 鈥減rice taker鈥� firm?
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