Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run. Which of the following is one reason for this?
A) Firms from other countries are able to produce similar products at lower costs.
B) Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms. But eventually consumers realize that all of the firms sell virtually identical products.
C) Firms in these industries sell identical products.
D) Owners of perfectly competitive firms realize that their short-run profits are temporary. Therefore, they either sell their businesses or develop other products that will earn short-run profits.
C
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A professional basketball franchise is trying to assemble a parcel of land to build an arena. There are 25 houses on the land the franchise needs. In this case,
A) eminent domain can reduce transactions costs and make a pie-increasing arena possible. B) eminent domain can reduce the likelihood of holdouts and make a pie-increasing arena possible. C) eminent domain is not called for as the land can probably be acquired more efficiently through bargaining. D) Both A and B are correct.
A group of firms that has entered into an agreement to restrict output and increase prices and profits is called
A) a compliance. B) a cartel. C) an oligopoly. D) a duopoly. E) a multi-firm monopoly.