What are the differences between competition in a purely competitive industry and competition in an industry with technological advance and innovation?
What will be an ideal response?
In pure competition, if an industry is earning above-normal profits, then firms will enter and copy the production methods and increase output that eventually drives down price until it equals average total cost. There is no dynamism or innovation in this industry. In innovative industries, firms will enter and try to reduce costs to increase profits or develop new products that attract buyers and increase revenue to increase profits. Even in these innovative industries, competition works to constantly push down above-normal profits because other firms can copy the lower-cost production methods and can develop attractive alternatives to new products.
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If Xt and Yt are cointegrated, then the OLS estimator of the coefficient in the cointegrating regression is
A) BLUE. B) unbiased when using HAC standard errors. C) unbiased even in small samples. D) consistent.
Which of the following actions by the Fed would increase the money supply?
a. Reducing the required reserve ratio. b. Selling government bonds in the open market. c. Increasing the discount rate. d. None of these.
The net capital outflow is the net flow of:
A. capital goods owned outside a country. B. funds invested outside of a country. C. capital goods owned within a country. D. funds invested within a country.
The inflation tax
a. is an alternative to income taxes and government borrowing. b. taxes most those who hold the most money. c. is the revenue created when the government prints money. d. All of the above are correct.