How do perfectly competitive markets allow for the movement of resources from less productive industries to more productive industries?
What will be an ideal response?
Perfectly competitive markets are characterized by free entry and exit of firms. Whenever firms in a particular industry are seen to earn positive economic profits, other firms are attracted to the industry. Thus, the firms that are entering the profit-making industry bring resources from other industries where they were not fully utilized. Similarly, when an industry is incurring losses, some firms move out of the industry. This allows for the movement of resources from the less productive, loss-incurring industry to other industries.
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"Banana republics" refers to:
A) nations that do not participate in free trade. B) nations that are net importers. C) nations that specialize in the production of only one good. D) nations that produce only agricultural products.
The deadweight loss that is associated with a monopolistically competitive market is a result of
a. price falling short of marginal cost in order to increase market share. b. price exceeding marginal cost. c. the firm operating in a regulated industry. d. excessive advertising costs.