Describe the entry/exit condition in a perfectly competitive market. Further, detail why this condition hinges on...

Describe the entry/exit condition in a perfectly competitive market. Further, detail why this condition hinges on the relative position of MC and ATC. Why is AVC not important for the entry/exit condition? Can you tell what happens to revenues for a given firm in this market as more firms enter?

Expert Solution

(a) In a perfectly competitive market, entry and exit are free. If firms make short run economic profit, new firms will enter and if firms are incurring short run economic loss, firms will exit the market.

(b) A perfectly competitive firm maximizes profit (or minimizes loss) by equating price with Marginal cost (MC). Since profir per unit is equal to Price less ATC, it means unit profit equals MC less ATC. If MC lies above ATC, firm makes profit and new firms will enter. If MC lies below ATC, the firm is making loss and some firms will exit.

(c) AVC is not important since short run profit or loss is determined by the difference between MC and ATC curves, not be difference between MC and AVC curves.

(d) As more firms enter, market supply rises which lowers market price. At the same time, individual firm's demand falls since there are higher number of firms in market. So firm revenue decreases with new entry.

Rahul Sunny answered 2 years ago

Explain in detail the conditions that would cause firms to enter or exit a perfectly competitive...

Explain in detail the conditions that would cause firms to enter or exit a perfectly competitive market. What is the effect of this entrance and exit on the market and long-run profitability of competitive firms?

In monopolistically competitive markets, the property of free entry and exit suggests that the market structure...

In monopolistically competitive markets, the property of free entry and exit suggests that the market structure will eventually be characterized by perfect competition in the long run. all firms earn zero economic profits in the long run. some firms will be able to earn economic profits in the long run. some firms will be forced to incur economic losses in the long run. If, to begin, a market is perfectly competitive, and then it is taken over by three or...

Describe the characteristics of a perfectly competitive market and a monopolistically competitive market? How are they...

Describe the characteristics of a perfectly competitive market and a monopolistically competitive market? How are they similar? How are they different?

1. In the long-run a perfectly competitive firm should exit from the market. a. True b....

1. In the long-run a perfectly competitive firm should exit from the market. a. True b. False 2. A perfectly competitive firm is earning an economic profit when a.P>ATC b.P =ATC c.MR= MC d. MR>MC 3.A firm operating in a perfect market maximizes its profit by adjusting a. its output price until it exceeds average total cost as much as possible. b. its output price until it exceeds marginal cost as much as possible. c. its output until its marginal...

27. In a perfectly competitive market, A) firms can freely enter and exit. B) firms sell...

27. In a perfectly competitive market, A) firms can freely enter and exit. B) firms sell a differentiated product. C) transaction costs are high. D) All of the above. 28. The "Got Milk?" advertising campaign is a good example of A) advertising in a competitive market. B) how advertising in a competitive market does not pay off for a single firm. C) interest groups financed by the industry advertise for the whole industry. D) All of the above. 29. A...

Explain how entry and exit lead to a long-run equilibrium in a competitive market. Can you...

Explain how entry and exit lead to a long-run equilibrium in a competitive market. Can you give any real-world examples of firms joining or leaving markets that you suspect are related to this adjustment process?

Is the gas market a perfectly competitive market? Why or Why not? What is the cause...

Is the gas market a perfectly competitive market? Why or Why not? What is the cause of these high prices? Are oil companies to blame? Is the government to blame? Should we enact price controls on the market? What can we do to combat the high prices

2. Competitive Firm Equilibrium Long run, Exit/Entry in Long Run, Explain why a competitive firm can...

2. Competitive Firm Equilibrium Long run, Exit/Entry in Long Run, Explain why a competitive firm can only earn normal economic profit (define) in long run. 3. Define monopoly, explain why the MR and P( AR) curve for a monopolist are different and why they are downward sloping and why does MR lie below the AR curve. Compute Monopoly P and Q and profits; compare monopoly price/quantity/profits with a competitive market price and quantity. Compute CS, PS, TS for monopoly as...

1) Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

True or false1) Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.2) The airline and trucking industries are two examples of industries that were regulated becausethey were natural monopolies.3) One way that government can encourage the production of goods or services that haveexternal benefits is to subsidize the good or service.4) Because of free riders, a private, unregulated market would not produce the efficient quantityof a public good.

Why is an exit condition so important for a while loop?

Why is an exit condition so important for a while loop?a.An exit condition is not vital. A while loop works fine without one.b.So the programmer knows when it is okay to leave the room.c.If no exit condition is provided, while loops cannot continue beyond one iterationd.It allows the loop to end instead of running indefinitely.e.While loops are unstable, and must know how to exi

Question