One of the drawbacks of open markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run.

Question

Quizplus · Accepted Answer

Open markets and competition actually help prices reach equilibrium in the long run through the mechanism of supply and demand. If prices are too high, consumers will switch to substitute products or find alternative solutions, while producers will increase supply to take advantage of the higher profits. This leads to a downward pressure on prices, eventually bringing them closer to their equilibrium value. Similarly, if prices are too low, some producers will exit the market or reduce output, while consumers will increase demand, leading to an upward pressure on prices. In the long run, open markets and competition facilitate the discovery of the equilibrium price and quantity that balances supply and demand.

One of the Drawbacks of Open Markets Is the Fact