Author Question: How would the introduction of legal or technical barriers to entry affect the long-run equilibrium ... (Read 46 times)

mikaylakyoung

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How would the introduction of legal or technical barriers to entry affect the long-run equilibrium in a perfectly competitive market?
 
  What will be an ideal response?

Question 2

The difference between the highest price a consumer is willing to pay for a good and the price the consumer actually pays is called
 
  A) consumer surplus. B) the income effect.
  C) producer surplus. D) the substitution effect.


Tonny

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Answer to Question 1

In a perfectly competitive market, the lack of entry barriers ensures that the market price is ultimately driven down to minimum average cost in the long run. However, if there are barriers to entry in a market, new firms will find it difficult to enter, reducing the downward pressure on price. This will allow the existing firms to earn economic profits in the long run. As long as these barriers exist, firms can sell goods at a price that is above average total cost.

Answer to Question 2

A



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