6. The National Council of Economic Education’s EconEdLink has an interesting mo
ID: 1107648 • Letter: 6
Question
6. The National Council of Economic Education’s EconEdLink has an interesting module on the economics of Internet access at http://www.econedlink.org/teacher-lesson/10 (Links to an external site.)Links to an external site. Please review the materials provided. Is provision of Internet access a competitive industry? Briefly discuss.
7. Commodities like gold often trade in markets that are examples of perfect competition. Think a commodity that you believe trades in a perfectly competitive market, and describe why you believe this is so.
8. (The Short-Run Firm Supply Curve) An individual competitive firm’s short-run supply curve is the portion of its marginal cost curve that equals or rises above the average variable cost. Explain why.
9. What are the major characteristics of perfectly competitive market?
10. (Perfect Competition and Efficiency) Define productive efficiency and allocative efficiency. What conditions must be met to achieve them?
Explanation / Answer
9. Characteristics of Perfect Competition:
(i) There is free entry and exit of firms
(ii) Firms are selling homogeneous and identical products in the market.
(iii) Firms under this form of market are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection.
(iv) Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. If one seller try to charge higher price then it will lose all his customers because all firms are selling similar products in every respect like color, shape, brand, etc.
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