Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Chapter 6, Problem 3Q
To determine
Effect on long-run equilibrium in a
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Has any particular firm in the perfectly competitive market found a way to differentiate or distinguish itself from its competitors? If so, what did the firm do? If not, what prevents the firm from differentiating itself?
How would the introduction of legal or technical barrier to entry affect the long-run equilibrium in a market that was perfectly competitive before the introduction of the new barriers to entry?
Assume the firms in a perfectly competitive market are initially incurring economic losses. An increase in supply would cause existing firms' economic losses to decrease.
True OR False?
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Microeconomics (2nd Edition) (Pearson Series in Economics)
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- Why are perfectly competitive markets considered economically efficient?arrow_forwardWhich of the following is NOT a requirement for a market to be perfectly competitive?arrow_forwardWill 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_forward
- Why don't firms in a competitive market have excess capacity in the long run?arrow_forwardYou read in a business magazine that farmers are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time (in the long run) to each of the following? The equilibrium output in agricultural markets based on what happens to the price given the change in supply, what do you think will happen to the equilibrium quantity? Will it remain the same, increase or decrease?arrow_forwardHow to find the inverse demand equation faced by a perfectly competitive market?arrow_forward
- We expect that firms in perfectly competitive markets can earn higher economic profits in the short run but will only earn normal profit in the long run. Why do we expect perfectly competitive firms to be unable to earn high economic profit in the long run? The inability of perfectly competitive firms to earn high economic profit in the long run is dependent on there being low barriers to entry in perfectly competitive markets. Explain why this is the case. Why do firms remain in business if they cannot earn economic profit?arrow_forwardSuppose you run an independent trucking business. You own a tractor trailer for hire. You work with a broker who offers you business to transport various cargos from one location to another. You can choose to take a particular job at the price offered or not. The broker works with many similar truckers. Independent trucking is an industry that can be considered perfectly competitive. Draw a graph showing market supply, market demand, and equilibrium price and quantity. Draw a corresponding graph for the individual firm/trucker using the market equilibrium price and marginal cost curve. If you line up the two graphs horizontally, the equilibrium price should be the same on both graphs. Now suppose that the economy improves as U.S. manufacturers produce more output. What impact will this have on the independent trucking industry in the short run, in terms of the market price, output of an individual firm, and market equilibrium quantity? What impact will this have on the firm’s profits?…arrow_forwardIn the long run, perfectly competitive firms make zero economic profit. If this is the case, why does the firm even bother producing? Why not exit the market completely?arrow_forward
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