In perfect
competition we also assume that firms can freely enter and exit the industry.The assumption of free entry implies that if firms in an industry are earning excessively high profits,new firms that seek to do the same thing are likely to spring up.Fast food restaurants are quick to spring up when a new shopping center opens.Where profit opportunities present themselves, we assume that firms sill enter and compete for them.
Free exit is possible when firms can simply stop producing their products and leave a market .Generally speaking,a firm closes dowm because it is suffering losses or because profits are insufficient .New England textile and furniture products found themselves facing increasing foreign competition, as well as lower production costs in the South .While some firms packed up and moved ,others simply got out of the business altogether.
16. Which of the following is not a feature of perfect competition according to the passage?
A The firms involved are small compared to the size of the industry.
B The firms involved produce goods of the same kind .
C The size of the industry is ususlly very samll.
D The price of the products is deterimned by the market.
17. In a perfectly competitive industry ,the price is decided by
A some leading firms in this business.
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