In a certain large city there are two firms that supply concrete. The concrete sold by the first firm is indistinguishable from the concrete sold by the second firm. Is the market competitive?
The market is not competitive because there are only two sellers.
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A wheat farmer and a firm in a perfectly competitive market are similar in that
A) both will earn an economic profit if their total revenue equals their total cost. B) both face vertical demand curves. C) both have to lower their prices if a rival firm lowers its price. D) both face horizontal demand curves.
Which of the following comparisons is true regarding price elasticity of demand?
A. The demand for monthly car payments is less elastic than the demand for a monthly gym membership because the car payments require a greater share of the consumer's income. B. The demand for gasoline a year after a price change is less elastic than the demand for gasoline a week after a price change because consumers have had time to adjust. C. The demand for water is less elastic than the demand for diamonds because water is a necessity but diamonds are a luxury. D. The demand for cough syrup is less elastic than the demand for insulin because there are no close substitutes for insulin.
Under the reasonable dynamic assumptions discussed in the text, a monetary contraction should result in
A) an immediate rise in the interest rate, and no further interest rate changes. B) an immediate rise in the interest rate, and then a fall in the interest rate over time. C) an immediate rise in the interest rate, and then a further rise over time. D) a very gradual but steady rise in the interest rate to its new equilibrium level. E) no change in the interest rate initially, and then a sudden rise to its new equilibrium value.
Regulators employ average cost pricing instead of marginal cost pricing because
A) average cost pricing is more efficient than marginal cost pricing. B) price must be high enough to cover all opportunity costs if the firm is to stay in business. C) the price is lower with average cost pricing. D) average cost pricing is simpler to compute than marginal cost pricing.