Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 22, Problem 11QP
To determine
Explain why people study the theory of
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You 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 number of farms
can new firms enter the market? If they can, what will happen to the market supply curve? If they cannot enter, explain.
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?
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 (MindTap Course List)
Ch. 22.1 - Prob. 1STCh. 22.1 - Prob. 2STCh. 22.1 - Prob. 3STCh. 22.1 - Prob. 4STCh. 22.2 - Prob. 1STCh. 22.2 - Prob. 2STCh. 22.2 - Prob. 3STCh. 22.2 - Prob. 4STCh. 22.3 - Prob. 1STCh. 22.3 - Prob. 2ST
Ch. 22.3 - Prob. 3STCh. 22.3 - Prob. 4STCh. 22.4 - Prob. 1STCh. 22.4 - Prob. 2STCh. 22 - Prob. 1QPCh. 22 - Prob. 2QPCh. 22 - Prob. 3QPCh. 22 - Prob. 4QPCh. 22 - Prob. 5QPCh. 22 - Prob. 6QPCh. 22 - Prob. 7QPCh. 22 - Prob. 8QPCh. 22 - Prob. 9QPCh. 22 - Prob. 10QPCh. 22 - Prob. 11QPCh. 22 - Prob. 12QPCh. 22 - Prob. 13QPCh. 22 - Prob. 14QPCh. 22 - Prob. 15QPCh. 22 - Many plumbers charge the same price for coming to...Ch. 22 - Prob. 17QPCh. 22 - Prob. 18QPCh. 22 - Prob. 1WNGCh. 22 - Prob. 2WNGCh. 22 - According to the accompanying table, what quantity...Ch. 22 - Prob. 4WNGCh. 22 - Prob. 5WNGCh. 22 - Prob. 6WNGCh. 22 - Prob. 7WNGCh. 22 - Prob. 8WNGCh. 22 - Prob. 9WNGCh. 22 - Prob. 10WNG
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- How satisfying the assumptions of perfect competition and partial equilibrium makes it impossible to derive an upward sloping supply curve?arrow_forwardWhy are perfectly competitive markets considered economically efficient?arrow_forwardMany economists would argue that there is no such thing as perfect competition in the real world. What limitations to that theory would support their argument?arrow_forward
- You 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_forwardWhat are the advantages of pure competition?arrow_forwardHow equilibrium price is determined under perfect competition?arrow_forward
- You 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 profits of farmers based on what happens to the price, what do you think will happen to the profits earned by the firms/farmers that previously existed in the market?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_forwardIn the year 2000, the town of Cuenca in Batangas did not have mountain resorts. Because of the influx of mountaineers to Mount Maculot during weekends, there are now five resorts operating in the said town and more than 10 resorts in nearby towns. All these resorts offer the same amenities—swimming pools and affordable lodgings. What feature of competitive markets does this demonstrate? Explain your answer.arrow_forward
- why do economists and policy makers use perfect competition as a benchmark to analyze market structure and performance?arrow_forwardLooking around your city, what businesses do you think come closest to the model of a perfectly competitive market? Explain why this is the case using correct economic terms and concepts.arrow_forwardIf all assumptions of perfect competition hold, why would firms in such an industry have little incentive to carry out technological change or much research and development?arrow_forward
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