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Economics: Principles & Policy
14th Edition
ISBN: 9781337912679
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning US
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Question
Chapter 10, Problem 5TY
To determine
The effect of the existence of an economic profit in a
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You witnessed new firms entering a competitive market. What can you infer for the existing firms in that market?
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Chapter 10 Solutions
Economics: Principles & Policy
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Similar questions
- In a perfectly competitive market, how do we go from a short run equilibrium to a long run equilibrium?arrow_forwardCan you think of a product that meets at least most of the criteria required for a perfectly competitive market? Which criteria does it fail to meet?arrow_forwardWhen is it the right time when a firm will enter a competitive market?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_forwardHow equilibrium price is determined under perfect competition?arrow_forwardHas 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?arrow_forward
- In 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_forwardIdentify the defining characteristics of a competitive market.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 are perfectly competitive markets considered economically efficient?arrow_forwardWhen should a firm exit the market 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 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.arrow_forward
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