ECONOMICS
TECHNOLOGY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Markets with high start-up costs are less likely to be perfectly competitive.
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Markets with high start-up costs are more likely to be perfectly competitive.
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Low start-up costs are likely to make a market less competitive.
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There is no consistent relationship between start-up costs and the competitiveness of a market.
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Detailed explanation-1: -What is the relationship between start-up costs and a competitive market? High start-up costs are likely to make a market less competitive.
Detailed explanation-2: -The profitability of a perfectly competitive firm depends on the relationship between the average cost of the firm and the market price. If the price is above the variable cost (P>AC), the firm makes a positive economic profit. If the market price is below the average cost of the firm(P<AC), the firm makes a loss.
Detailed explanation-3: -If the market price received by a perfectly competitive firm leads it to produce at a quantity where the price is greater than average cost, the firm will earn profits.
Detailed explanation-4: -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.