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Comprehensive Final Paper

Comprehensive Final Paper - all producers internationally 3...

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Comprehensive Final Paper Robert McGill BA 201 Microeconomics 3 April 2011
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Comprehensive Final Paper 1.   Discuss perfect competition and long-run equilibrium. Provide detailed descriptions, definitions and concrete examples of your findings. In the long-run equilibrium of a perfectly competitive industry , the market price , number of firms in the industry, and each firm's scale of production adjust such that each firm produces at the lowest point on its long-run average cost curve--which is its minimum efficient scale 2. How does the proliferation of global trade and competition contribute to markets moving more away from market-possessing power to more perfect competition? Global trade could be examples of these (in the absence of large transaction costs), as  producers from various countries compete to drive prices down to a uniform international  price. In such a situation, the technology and factors of production required are available to 
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Unformatted text preview: all producers internationally. 3. When does marginal social benefit equal marginal social cost and why? Marginal in this assumption would mean the cost or the benefit of producing one extra unit. If your marginal cost is higher than marginal benefit, then producing one extra unit would cause your profit to go down. If marginal benefit is higher than marginal cost, this means that if you produce one extra unit would cause your profit to go up. In other words, if your marginal benefit is higher, you should produce more to gain more profit. However, there will come a time MC would be greater than MB. So you should produce MB=MC which will give you the maximum possible profit. If either one is higher, you are not using your resources effectively....
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