Take Home Quiz 7 Mgt[1]. Econ

Take Home Quiz 7 Mgt[1]. Econ - Take-home Quiz 7 HONOR CODE...

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Take-home Quiz 7 HONOR CODE APPLIES – DO NOT TALK TO YOUR CLASSMATES Managerial Economics - Spring 08 Due Date: 4/19/08 1. Suppose that grocery stores and gasoline stations in a large city would appear to be examples of competitive markets: There are numerous relatively small sellers, each seller is a price taker, and the products are quite similar. a. How could we argue that these markets are not competitive? These markets could not be competitive because of some reasons. First, grocery stores and gasoline stations belong to markets that make some differentiations in products. For example, I can go to certain gas station that provides me with car wash or discounts from its associated mart, which is better than others in the same industry. In addition, there is slight control of price in such markets. Moreover, in the short run, grocery stores and gasoline stations in the competitive markets will earn above-average rates of return, which will encourage new firms to enter the industry. Thus, there will be many firms and increase in quantities of goods supplied. However, the competition will decrease in the long run, and there will not be really competitive market because many firms will exit as a result of the decrease in the profit. Exit will reduce the number of competitors, and then there will be decrease in quantities produced. However, such markets can be competitive because they produce similar goods
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This note was uploaded on 11/13/2011 for the course MIS 4100 taught by Professor Maxnorth during the Spring '11 term at Birmingham-Southern College.

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Take Home Quiz 7 Mgt[1]. Econ - Take-home Quiz 7 HONOR CODE...

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