Author Question: Why is it that if an industry is operating under conditions of internal scale economies then the ... (Read 94 times)

vicky · **on:** Jun 30, 2018

Why is it that if an industry is operating under conditions of internal scale economies then the resultant equilibrium cannot be consistent with the pure competition model?

What will be an ideal response?

Question 2

With fixed exchange rates, an increase in the foreign inflation rate, with constant income and domestic credit, will lead to

A) a change in the exchange rate.
B) an increase in international reserves.
C) a decrease in international reserves.
D) no change in international reserves.

Liamb2179 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Because once one firm will becomes bigger than another, or if one firm began the industry, then no other firm will be able to match its per unit cost, so that they would be driven out of the industry. The firm would become a natural monopoly.

Answer to Question 2

B