Consider the following characteristics of a particular industry:
- each firm faces a demand curve with a price elasticity greater than 10 000
- each firm produces at a minimum efficient scale in long- run equilibrium This industry is likely to be

Question

Quizplus · Accepted Answer

The high price elasticity of demand implies that consumers are very sensitive to changes in price, which typically characterizes perfectly competitive markets. Additionally, firms producing at minimum efficient scale implies that they are producing at the lowest possible average cost, which is also a characteristic of perfectly competitive markets. Therefore, this industry is likely to be perfectly competitive.

Consider the Following Characteristics of a Particular Industry