The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods? Explain.

The basic model of pure competition reviewed in this chapter finds that in the long run all firms in a purely competitive industry will earn normal profits. If all firms will only earn a normal profit in the long run, why would any firms bother to develop new products or lower-cost production methods? Explain.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: Perfect Competition

Section: Chapter Questions

Problem 4QP

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Similar questions

In the model of perfect competition, there: are a few firms producing undifferentiated products. are many firms producing undifferentiated products. are many firms producing differentiated products. are a few firms producing differentiated products. is one firm producing a highly differentiated product. which statement is true?
In the model of perfect competition, firms maximize profits by producing where: the difference between marginal revenue and marginal cost is maximized. the difference between price and marginal cost is maximized. the difference between price and marginal revenue is maximized. marginal revenue equals price which statement is true? price equals marginal cost.
Give examples, when the conditions of pure and perfect competition are relatively accomplished.
Explain why a competitive firm’s marginal cost curve is the same as its supply curve.
What is the formula for profit maximization by firm ? Why does this result in the marginal cost curve becoming the same as the supply curve for firms in perfect competition? what is the difference between the short run and long run ? Why does this difference matter in our discussion of firm behavior?