Chapter 23, Problem 12P

To determine

Minerals market can be considered as perfectly competitive. Minerals are used as inputs in digital devices. In several digital devices markets, persistent increases in demand for these devices ultimately have generated long run increases in the market prices of these devices. Describe in your own words, the types of adjustments that must have occurred in these markets to have brought about this outcome, and evaluate whether such digital device industries are increasing, constant or decreasing cost industries.

Concept Introduction:

Perfect competition: The perfect competition is a purely competitive market selling homogenous products. The characteristics of perfect competition are, there are many buyers and sellers, firms get freedom of entry and exit which means at any time, a new firm can enter into the market or an existing firm can leave the market. All products produced in the market are homogenous and identical. The firm is a price taker. Market price is determined by demand and supply forces. The consumers have full knowledge about the market situations and no single firm can alter the market price by changing their product’s price. During the long run, firms make normal profits and during the short run, firms make only super normal profits.