Microeconomics Final Paper

In: Business and Management

Submitted By Pet03
Words 1108
Pages 5
For the purpose this paper I will need to answer several questions beginning with defining and discussing perfect competition and long-run equilibrium. How the proliferation of global trade and competition contribute to markets moving away from market-possessing power to perfect competition. Finally, I will discuss when marginal social benefits equal marginal social cost and why this occurs.
Perfect competition is defined as, “a market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run”. (McEachern, 2010) Perfect competition is very rare in the many different markets. One market stands out in this type of scenario which is the commodity type markets such as grain. One farmer does not have a leg up on the competition because of the lack of variables thus there is no room for a monopoly. The price of grain is the same all across the board. One farmer may be able to produce more than the other but they will still be given the same price per bushel as someone who is not able to cultivate as much. However, if a farmer can no longer produce the grain and decides to remove themself from the market then it will not cause a problem in that area. In a perfect competition the market has a downward sloping demand curve but the firms demand curve is horizontal, showing its elasticity.
Long-run equilibrium is defined as, “when the market price equates the quantity demanded to the total quantity supplied by the number of firms in the industry when each firm produces on its long-run supply curve”. (Unknown) In the case of long-run equilibrium in a perfectly competitive market there needs to be zero economic profits in order to have equilibrium. If there is a positive economic gain one may see firms entering the market and existing firms expanding. The opposite of this is when there are…...

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