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How do money market firms work?
Money market fund firms operate by combining many small investors' funds to accumulate the volume of money needed to buy money market instruments.
What is the stock market used for?
It can be used by firms as a source of financing.
Why would a market that consisted entirely of perfectly competitive firms not be 'perfect'?
The concept of perfect competition is based on a large number of small firms, where no single firm can affect the market price. These firms operate as price takers, and use the cost supplied by the market. These ideal companies would insure efficiency. However, perfect competitive firms are unrealistic in real world scenarios.
Conditions that prevent the entry of new firms in a monopoly market are?
Barriers to entry.
What is imperfect competition?
a market structure in which a large number of firms all produce the same product
Firms in an industry will not earn long-run economic profits if?
In long run under perfect competition new firms enters into the market and share the profit of existing firms due to free entry and exit .the new firms in the long run enters into the market until they earn profit and leaves the market if they suffer looses. In short if there is free entry and exit
Why must profits be zero in long-run competitive equilibrium?
The short answer: entry of new firms and exit of old ones. If profits are positive, new firms will enter the industry, piling in until they compete away all these profits. If long-term profits are negative, firms will exit until the price rises enough so that the firms who stay in the market can break even.
What is monopolistic competition and perfect competition?
Three conditions characterize a monopolistic & Perfectly competitive market. First, the market has many firms, none of which is large. Second, there is free entry and exit into the market; there are no barriers to entry or exit. Third, each firm in the market produces a differentiated product. This last condition is what distinguishes monopolistic competition from perfect competition. In perfect competition in addition to the prior two characteristics the firms produces similar products.
Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm?
In perfectly competitive markets, economic profits are zero in the long run because firms are able to enter and exit the market. If firms in a perfectly competitive market are profitable, there would be an incentive for new firms to enter. Supply would increase, causing an increase in quantity and the price to be driven back down to equilibrium: NO PROFIT! If firms in a perfectly competitive market are suffering a loss, some firms would choose to exit the market. Supply would decrease, causing a decrease in quantity and the price to be driven back up to equilibrium: NO PROFIT!
In long run equilibrium P equals minimum ATC equals MC what is the significance of the equality of P and minimum ATC for society?
There are only normal profits in the market, so no firms will enter or exit the market.
What are the roles of households and firms in the market economy?
in a market economy, firms make the goods. Households buy the goods
What are the roles of household and firms a market economy?
in a market economy, firms make the goods. Households buy the goods
What are the rules of households and firms in a market economy?
In a market economy, firms make the goods. Households buy the goods.
What is markets in which firms sell their output of goods and services?
The product market is the market in which firms sell their output of goods and services.
In a free market economy firms purchase from households?
In a free market economy, firms purchase factors of production such as labor, from households.
The market structure that is characterized by a small number of large firms that have some market power is called?
The market structure that is characterized by a small number of large firms that have some market power is called
What is a market structure in which a few large firms dominate a market?
a monopoly
