Question

The widget industry has the following characteristics: over 600 producers with no one producer furnishing more than 0.5% of the industry’s total output; widgets produced by different firms are identical and there are no brands or labels on the product; there are no significant barriers to entry to the widget market; there is no economic profit in the long run. The widget market is best described as what type of market? Perfect competition Monopolistic competition Differentiated oligopoly Undifferentiated oligopoly Pure monopoly

Answer 1

Answer:

Perfect competition

Explanation:

The widget market is best described as a perfectly competitive market. A perfectly competitive market is a type of market without restriction in entry and exit, it is characterized by many sellers of similar products and buyers and there is perfect information about the price of goods. In a perfectly competitive market, due to the free entry and exit, no single producer has an influence over the price of goods. In the long-run, in perfectly competitive market, there is no economic profit because more producers will enter the market if it is profitable thus bringing about competition which will cause average revenue to equal average cost in the long run.