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Cost Theory

Perfect Competition Rise in Demand

Perfect Competition or Pure Competition (PC) is a type of market structure, which doesn’t exist and is considered to be theoretical. There are very many small firms that produce the identical product. They sell whatever they can produce, and no single firm affects the market price. In the long run, with the entry of new firms in the industry, the…
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Durable & Non-Durable Goods

Durable goods are those goods that don't wear out quickly and last over a long period. Examples of durable goods include land, cars, and appliances. While non-durable goods or soft goods are those goods that have a short life cycle. They are used up all at once or have a lifespan of fewer than three years. For example light bulbs, paper products,…
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Theory of Production: Short-Run Analysis

The Theory of production explains the principles by which a business firm decides how much of each commodity that it sells (its “outputs” or “products”) it will produce. And how much of each kind of labor, raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use. Economics, models, and theories…
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Perfect Competition in the Long Run

In the long run, we assume that all Factors of Production are variable, which means that the entrepreneur can adjust plant size or increase their output to achieve maximum profit. Perfect Competition Long Run equilibrium results in all firms receiving normal profits or zero economic profits.Perfect Competition Long Run Factor Mobility…
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Monopolistic Competition Market Structure

In Monopolistic Competition, there are many small firms who all have minimal shares of the market. Firms have many competitors, but each one sells a slightly different product. Firms are neither price takers (perfect competition) nor price makers (monopolies).Example of Monopolistic Competition The athletic shoe market:When you…
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Market Structure: Oligopoly

In an Oligopoly market structure, there are a few interdependent firms dominate the market. They are likely to change their prices according to their competitors. For example, if Coca-Cola changes their price, Pepsi is also likely to.Examples of Oligopolies In the wireless cell phone service industry, the providers that tend to dominate…
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