Author Question: Assume the wool industry is perfectly competitive. Why is it difficult for a wool producer to make ... (Read 65 times)

Zulu123 · **on:** Apr 19, 2019

Question 1

A perfectly elastic demand curve implies that,
ceteris paribus

◦ a firm can sell more by lowering its price.
◦ if a firm raises its price above the market price, quantity demanded will equal zero.
◦ the price a firm charges is irrelevant, as it will sell the same amount regardless of the price charged.
◦ a firm can raise its price and not lose all its customers.

Question 2

Assume the wool industry is perfectly competitive. Why is it difficult for a wool producer to make excess profits in the long run?

◦ the fact that wool producers are ʺprice takersʺ
◦ the assumption that wool producers in the industry do not ʺdifferentiateʺ their products
◦ the fact that the demand curve facing each wool producer is perfectly elastic
◦ There is free entry into the wool industry.

mcinincha279 · **Reply #1 on:** Apr 19, 2019

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