ECONOMICS
COMPETITION AND MARKET STRUCTURES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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highly competitive and firms find it impossible to earn an economic profit in the long run
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marked by firms continuously trying to change their products so that consumers prefer their product to their competitors’ products.
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dominated by fierce advertising campaigns
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None of the above
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Detailed explanation-1: -In a perfectly competitive market, firms can only experience profits or losses in the short run. In the long run, profits and losses are eliminated because an infinite number of firms are producing infinitely divisible, homogeneous products.
Detailed explanation-2: -Perfect competition is a type of marketplace where multiple companies are selling the same product or service, and a large number of consumers are looking to purchase it. None of these companies have the power to set a price for that product or service without losing business to other competitors.
Detailed explanation-3: -Firms in a perfectly competitive world earn zero profit in the long-run. While firms can earn accounting profits in the long-run, they cannot earn economic profits.
Detailed explanation-4: -If a perfectly competitive firm attempts to charge even a tiny amount more than the market price, it will be unable to make any sales. Perfect competition occurs when there are many sellers, there is easy entry and exiting of firms, products are identical from one seller to another, and sellers are price takers.
Detailed explanation-5: -A perfectly competitive market is an ideal market where there are many well-informed buyers and sellers, no barriers to market entry and no possibility of a monopoly. Profit, diminishing supply, rivalry and exclusion are among the 10 characteristics of a competitive market.