Author Question: Why do economists prefer to use the model of perfect competition in most economic ... (Read 137 times)

chandani · **on:** Jun 30, 2018

Why do economists prefer to use the model of perfect competition in most economic analysis?

Question 2

When the marginal costs of firms in perfect competition increases, the short-run supply curve of the industry will shift to the left.
a. True
b. False
Indicate whether the statement is true or false

irishcancer18 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Economists have three main uses for the model. First, its assumptions are reasonably close to actual conditions in some markets. Second, if a market satisfies some but not all of the assumptions, we often start from perfect competition and then see what happens when we replace the usual assumptions with more realistic ones. Third, the perfectly competitive market is a standard for analyzing consumer and producer benefits.

Answer to Question 2

True