Lawn-care services in Dallas, Texas, charge $20 to mow an average-sized yard. Explain why there is little deviation from this rate
This is an example of perfect competition. Minimal barriers to entry into this industry mean that there are
many firms offering lawn care. Customers view the services of these firms as perfect substitutes. If any one
firm raises its rate, it stands to lose all its customers. On the other hand, there is little incentive for a firm to
cut its rate, because it can get as much business as it can handle at the going rate. Expanding its output will
have a negligible effect on the market price.
You might also like to view...
The total quantity of goods and services demanded by households, firms, foreigners, and government at varying price levels is:
a. gross domestic product. b. aggregate demand. c. aggregate expenditure. d. total demand. e. total expenditure.
The classical model is a poor predictor of short-run economic fluctuations in part because it assumes that
a. all workers wish to work b. government will prevent these fluctuations c. the labor market always clears d. the long run is just a series of short-run periods e. labor demand curve is stable
The supply curve for a perfectly competitive industry is obtained by
a. making an empirical study of historical data. b. vertically summing the supply curves of firms in the industry. c. horizontally summing the average cost curves of firms in the industry. d. horizontally summing the supply curves of firms in the industry.
The government can break up monopolies under federal antitrust legislation.
Answer the following statement true (T) or false (F)