Question

to a large number of small perfectly competitive firms. e n perfectly competitive firms and industry output will Assume an in
Question 4 and industry output will Assume an industry is currently a monopoly and the government breaks it up Wo a large num
0 0
Add a comment Improve this question Transcribed image text
Answer #1

Solution: Assume an industry is currently a monopoly and the government breaks it up into a large number of small perfectly competitive firms Price will fall and industry output will increase

Explanation: In a monopoly market, the power of the market is entirely into the hands of a single seller or a single firm. In monopoly a single seller is available for a product and hence people have no choice but to purchase goods from him. Firms are price setters in a monopoly market and hence to earn profits supply is also restricted by the seller.

When the government breaks the monopoly market into large number of small perfectly competitive firms, the prices are according to the market prices and hence prices fall which are equal to other perfectly competitive firms. Firms in perfect competition are price takers. As prices are decreased demand in the market also increases as now more people will purchase the same good at lower prices. As a result the industry output also increases because a normal supply is also maintained in a perfectly competitive market and the supply is not restricted to earn profits like it is in monopoly market.

Add a comment
Know the answer?
Add Answer to:
to a large number of small perfectly competitive firms. e n perfectly competitive firms and industry...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • QUESTION 6 Industry is a perfectly competitive industry. Assume that as a result of changes in...

    QUESTION 6 Industry is a perfectly competitive industry. Assume that as a result of changes in other markets there is a twenty percent increase in the price of variable inputs used by firms in industry Y. After all adjustments have taken place, we would expect the equilibrium price in industry Yto: increase and the number of firms to increase. decrease and the number of firms to increase. increase and the number of firms to decrease. decrease and the number of...

  • Suppose an economy produces cell phones and GPS devices in perfectly competitive industries. The economy is...

    Suppose an economy produces cell phones and GPS devices in perfectly competitive industries. The economy is currently operating at a point on its production possibility frontier. The economy will most likely move to a less-desirable point on the production possibility frontier if more firms enter the GPS device industry. O a single firm gains control over the production of cell phones. more firms enter the cell phone industry. more firms enter both the GPS device industry and the cell phone...

  • The market for coffee is perfectly competitive, has a large number of identical firms, and is...

    The market for coffee is perfectly competitive, has a large number of identical firms, and is in LONG-RUN equilibrium. The market demand curve is downward sloping, and the cost schedules have their usual shapes. Market price for a unit of coffee is $10. There is a decrease in the price of tea, a substitute for coffee. [A] In the SHORT RUN, in appropriate diagrams, show what happens to price, industry output, and the output and profits of a representative firm...

  • In the long run, all of the firms in a perfectly competitive industry will: exit the...

    In the long run, all of the firms in a perfectly competitive industry will: exit the industry if price is greater than average total cost. produce at an output level at which average total cost equals marginal cost. earn an economic profit greater than zero. O produce an output level at which price is greater than average total cost. Which statement about the differences between monopoly and perfect competition is INCORRECT? A monopoly will charge a higher price and produce...

  • Suppose the firms in a perfectly competitive industry merge to form a monopoly. Which of the...

    Suppose the firms in a perfectly competitive industry merge to form a monopoly. Which of the following would NOT occur? A. A fall in consumer surplus B. A rise in total consumer plus producer surplus C. A deadweight loss D. A rise in producer surplus

  • 28.   Firms will continue to enter a competitive industry until, in the LR,    a.   firms...

    28.   Firms will continue to enter a competitive industry until, in the LR,    a.   firms are making a fair rate of return    b.   the supply curve is meaningless    c.   all economic profits have been competed away    d.   (a) and (c) above are both correct   30.   When positive externalities exist in a competitive market, the competitive output will be larger than QSO. True or False? 31.   One reason economists object to monopoly is    a.   monopolies overproduce...

  • FICE 150 firms in the monopolistically competitive industry. Price is above marginal revenue, as a general...

    FICE 150 firms in the monopolistically competitive industry. Price is above marginal revenue, as a general rule, regardless of the number firms in the monopolistically competitive industry. At low levels of output, price is above marginal revenue. At high levels of ou price is below marginal revenue as long as the number of firms is not too ma because if it is too large, the monopolistically competitive industry will beco perfectly competitive. Question 13 (1 point) If monopolistically competitive forms...

  • Consider a competitive industry with a large number of firms, all of which have the cost...

    Consider a competitive industry with a large number of firms, all of which have the cost function c(y) = y 2 + 1 for y > 0 and c(0) = 0. Note that the marginal cost for this cost function is MC = 2y for y > 0. Suppose that initially the demand curve for this industry is given by D(p) = 84 − p. Note that the output of a firm does not have to be an integer number,...

  • Assume that the average wage of workers increases in a perfectly competitive industry. This change will...

    Assume that the average wage of workers increases in a perfectly competitive industry. This change will result in a(n): Multiple Choice O increase in marginal costs for firms in the industry and a rightward shift in the industry supply curve. O decrease in marginal costs for firms in the industry and a leftward shift in the industry supply curve. O decrease in marginal costs for firms in the industry and a rightward shift in the industry supply curve. increase in...

  • Consider a competitive industry with a large number of firms, all of which have identical cost...

    Consider a competitive industry with a large number of firms, all of which have identical cost functions cly) = y2 + 1 fory>O and c(0) = 0. (In the following problem, the output of a firm does not have to be an integer number, but the number of firms does have to be an integer.) (a) What is the firm's marginal cost? MCly) = [ans]y (b) What is the supply curve of an individual firm? S(p) = p/ If there...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT