f.6 econ..............................................

2007-02-20 10:06 pm
when an industry's price of services falls, those individuals with higher costs will leave first. therefore, these individuals suffer most

do you agree

回答 (3)

2007-02-21 8:57 am
✔ 最佳答案
Uncertain
agree, under price takers market
if the price fall is expected to be last for a long time,
higher-cost-firms will leave (due to free exit assumption)

however, also under price takers market,
if the fall in price is expected to be a short-lifted one,
for SR production, seller still stay in the industry if MR > AVC

in addition, the statement is uncertain under price searcher market
since sellers may bear short term loss if they think these are only short term price fluctuations.
moreover, fall in price does not necessary mean a loss to seller, they can still make a (reduced) gain due to its monopoly position

but if the price falls continuously, it is possible that the higher cost firms will leave earlier

from another view point,
if the seller is utility maximizer instead of wealth maximizer, he or she would stay in the industry even if the rent is lower or making a loss.

(second part)
(before answering, i want to ask how do you define「suffer」?)
under price taking market, due to free entry and exit, firms that have loss will leave at once, then they will no longer lose

under price searching market,
i) they may not necessary lose
ii) they may leave if they loss (same as takers); or
iio) if they are utility maximizer, if we see that they stay, that means that the satisfaction they gain from the business, is greater than the amount of money lost

to conclude, they are not suffering.
also, whether people suffer the most, has nothing to do with, the higher cost of production.
2007-02-23 12:08 am
Try to get what you mean....

Under a Long Run Perfect Competition, all firms are operate under a zero-profit condition. Even there is a slightly adjustment of price due to exit of firms, the price will eventually return to a "zero-profit" condition.

Now come back to your question...logically labout with higher opportunity cost (higher cost) shall leave the market prior to those who do have lower OC.
2007-02-21 7:46 am
when an industry's price of services falls, those individuals with higher costs will leave first
i agree it....
because the price fall , it may cover the cost of the lower cost individuals

but wt do u mean therefore, these individuals suffer most ?


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