Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?
What will be an ideal response?
Because once one firm will becomes bigger than another, or if one firm began the industry, then no other firm will be able to match its per unit cost, so that they would be driven out of the industry. The firm would become a natural monopoly.
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The Brander-Spencer model identified market failure in certain industries due to
A) unfair competition. B) wildcat destructive competition. C) environmental negative externalities associated with pollution. D) limited competition. E) lack of excess returns.
At the end of the year, Ford realizes it has overproduced Fiestas, because 2,500 of them are left unsold. How is this accounted for in that year's GDP? The cars are:
A. considered inventory and their value will increase investment. B. considered durable goods, and their value will increase consumption. C. not counted until they are sold in next year's GDP. D. considered a bad thing and reduce the value of investment.
The term substitution effect refers to the level of satisfaction or pleasure that people receive from their choices
a. True b. False Indicate whether the statement is true or false
If a country is an exporter of a good, then it must be the case that
a. the world price is less than its domestic price. b. consumer surplus is higher than a no trade situation. c. the world price is greater than its domestic price. d. they used an infant-industry argument to protect its producers.