Lawn-care services in Dallas, Texas, charge $20 to mow an average-sized yard. Explain why there is little deviation from this rate
This is an example of perfect competition. Minimal barriers to entry into this industry mean that there are
many firms offering lawn care. Customers view the services of these firms as perfect substitutes. If any one
firm raises its rate, it stands to lose all its customers. On the other hand, there is little incentive for a firm to
cut its rate, because it can get as much business as it can handle at the going rate. Expanding its output will
have a negligible effect on the market price.
You might also like to view...
The slope of an isoquant tells us
A) how much output increases when both inputs are increased. B) the increase in MPL when capital increases. C) the decrease in capital necessary to keep output constant when labor increases by one unit. D) the decrease in capital necessary to keep MPL constant when labor increases by one unit.
The current account is
A) the reserve assets created by the International Monetary Fund for countries to use in settling international payment obligations. B) the price of one nation's currency in term of the currency of another country. C) a category of the balance of payments transactions that measures flows of real and financial assets. D) a category of the balance of payments transactions that measures the exchange of merchandise, the exchange of services, and unilateral transfers.