Question

In certain industries, firms buy their most important inputs in markets that are close to perfectly competitive and sell their output in imperfectly competitive markets. Cite as many examples as you can of these types of businesses. Explain why the profits of such firms tend to increase when there is an excess supply of the inputs they use in their production process.

Answer 1

Answer:

a. In certain industries, firms buy their most important inputs in markets that are close to perfectly competitive and sell their output in imperfectly competitive markets.

The several industries firms buy their inputs in the markets that are close to perfectly competitively and sell their output in imperfectly competitive markets. In general, commodity markets and markets of raw materials move very close to being perfectly competitive. The reason for this is that there are many sellers and buyers, there are no strong exit or entry barriers, and the prices at which deals are struck are known to buyers and sellers.

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Answer 2

Answer:

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