What is the basic conclusion that is to be drawn from the chapter? On what two facts is this conclusion based? What are the implications?
What will be an ideal response?
The basic conclusion is that after all adjustments have been made in the long run in a purely competitive industry, product price will be equal to, and production will occur at, the minimum average total cost for each firm in the industry. This conclusion is based on the facts that: (a) purely competitive firms seek to earn profits and want to avoid losses; and (b) firms are free to enter or exit a purely competitive industry. The implications of these two facts means that if there are economic profits to be made in industry, new firms will be attracted to it and when they enter the industry they will eventually drive down the price until it equals the minimum of the average-total-cost curves in the industry. Conversely, if there are losses in an industry, firms will exit it and the product price will rise to equality with the minimum of the average-total-cost curves for firms in the industry. In the long run, purely competitive firms earn a normal profit, but not an economic profit.
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China is a clear example of a country that has:
A. achieved economic growth only after a democratic regime was in place. B. achieved economic growth without a democratic regime. C. failed to achieve economic growth without a democratic regime. D. failed to achieve economic growth, despite having a democratic regime.
A radio station is best described as
A) an end user in a transaction-based market. B) a platform in an audience-making market. C) an end user in a matchmaking market. D) a platform in a shared-input market.
A characteristic of long-run equilibrium is the economy is producing its potential output. This is:
A. defined as using 80 percent of the economy's resources at any time. B. the level of output consistent with an unemployment rate of 7.5%. C. the level of output the economy produces when its resources are used at normal rates. D. the maximum level of output the economy could produce at any time.
Autonomous consumption equals total consumption when ___________________.
Fill in the blank(s) with the appropriate word(s).