Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Question
Chapter 22, Problem 9CQ
To determine
The effects of competition among firms that leads to shut down condition.
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Students have asked these similar questions
If the producers of rice wants to maximize profit up to what level of output will it produce and at what price? What condition should be met in order for the firms to efficiently produce this level of output?
why competitive firms stay in business if they make zero profit?
George Stigler, "Perfect Competition, Historically Contemplated," Journal of Political Economy,Vol. 55, No. 1, (February 1957), pp. 1-17.
Despite the fact that few firms sell identical products in markets where there are no barriers to entry, economists believe that the model of perfect competition is important because
A.
economists prefer studying theoretical markets instead of actual markets.
B.
all markets eventually become perfectly competitive.
C.
it is a
benchmark—a
market with the maximum possible
competition—that
economists use to evaluate actual markets that are not perfectly competitive.
D.
this is the type of market that our business laws protect and promote.
Chapter 22 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- What is the relationship between economies of scale and the level of market competition?arrow_forwardWhat are the options available to a firm when the market demand exceeds capacity?arrow_forwardBased on the given graph:a. If this firm profit-maximizes, how much output will it produce and what price will it charge? b. When this firm profit maximizes, what (compute) is the firm’s profit or loss? Is this firm in a short run or long run equilibrium? Why? c. Does the firm minimize cost? Why or why not? How much excess capacity does this firm have?arrow_forward
- In long-run equilibrium, all firms in the industry earn zero economic profit. Why is this true?arrow_forwardPerfect competition is an extremely rare type of market in the real world. This is because the conditions necessary for perfect competition are difficult to meet. Write about an example of perfect competition (or at least a market that is very close to perfect competition). Find an example of a market that seems to be perfectly competitive. Explain how your example satisfies the four conditions necessary for perfect competition. Do sellers in the market you’ve described brand themselves to consumers? Does this support the idea that this market is perfectly competitive? Explain. Do different sellers in the market you’ve described charge different prices for their product? Does your answer support the idea that this market is perfectly competitive? Explain. Does it seem as if the example you mentioned is allocatively efficient? In other words, does the market produce enough of this good (or does it produce too much or too little)? Explain.arrow_forwardIn perfect competition, firms set price equal to marginal cost. Why can’t firms do this when there are internal economies of scale? Explain the answer.arrow_forward
- Will a profit-maximizing firm in a competitive market ever produce a positive level of output in the range where the marginal cost is falling? Give an explanation.arrow_forwardAt what output rate does the firm maximize profit or minimize loss?arrow_forwardAccording to marginal analysis, a perfectly competitive firm will produce an output level where what is true about its Marginal Revenue and its Marginal Cost?arrow_forward
- Perfect competition is an extremely rare type of market in the real world. This is because the conditions necessary for perfect competition are difficult to meet. Write about an example of perfect competition (or at least a market that is very close to perfect competition). Do different sellers in the market you’ve described charge different prices for their product? Does your answer support the idea that this market is perfectly competitive? Explain. Does it seem as if the example you mentioned is allocatively efficient? In other words, does the market produce enough of this good (or does it produce too much or too little)? Explain.arrow_forwardWhat are the conditions that distinguish perfect competition from other market structures?arrow_forward
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