Perfectly Competitive Market Characteristics

Summary

A perfectly competitive market is characterized by no barriers to entry and exit, perfect knowledge among participants, homogeneous products, and a large number of firms competing. Economic profits in such markets are short-lived as new entrants drive profits to normal levels. Economic profits, or rents, occur when a firm earns returns above the norm for similar risk levels. When a new firm enters a perfectly competitive market, economic profits decrease industry-wide before potentially rising again due to market adjustments.

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What is the answer of " in a perfectly competitive market, economic profits... A. Are a byproduct of low cost, efficient productiion processes. B. May persist for long periods C. Will increase as firms learn about costumers preferences D. Are competed awan as new entrants imitate incumbent firms
The correct answer is D. Are competed away as new entrants imitate incumbent firms.
In a perfectly competitive market:
- Economic profits are short-lived.
- New entrants drive profits to normal levels.
- There is free entry and exit.
- Firms produce homogeneous products.
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Answer of " economic profits - or rents- are present whennn... A. A firm has higher returns than an established, less risky competitrr B. A firm has higher returns compared to an investment of similar risk C. A firm has the greatest market share in it's industry D. A firm's revenues exceed costs
The correct answer is B. A firm has higher returns compared to an investment of similar risk.
Economic profits, or rents, occur when:
- A firm earns returns above the norm for similar risk levels.
- They are often short-lived due to market adjustments.
- Competitors may enter, reducing these extraordinary profits.
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What is the answer of " a new firm enters a perfectly competitive market. What impact will this have on average profits in the industry? A. It earns high economic profits B . Economic profits increase industry - wide C. No economic profits are aearnes D. Economic profits decrease industry - wide before rising again
The correct answer is D. Economic profits decrease industry-wide before rising again.
In a perfectly competitive market:
- New entrants drive down profits.
- Short-term profits may initially decrease.
- Market adjustments may eventually bring profits back to normal levels.
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