Need help with Economics Please?
Suppose independent truckers operate in a perfectly competitive industry. If these firms are earning positive economics profits, what happens in the long run to the following: the price of trucking services, the industry quantity of output, the profits of trucking firms? Given these conditions, is the independent trucking industry a constant-cost, an increasing-cost, or a decreading-cost industry?
Answer:
The price of trucking would go down as more firms would enter the market to consume some of that great profit.
The quantity of output would increase for the same reason.
The profit of the trucking firms would go down do to increased competion.
The profits would eventually reach normal profits or what economists call zero economic profit. That means they are still making a profit but just not a huge killing. I would assume that it would be an economy to scale (decreasing cost industry) because the more trucks they have the larger the network they have and the less empty loads they must pull.
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A Market Demand Function Question?
Answer:
The price of trucking would go down as more firms would enter the market to consume some of that great profit.
The quantity of output would increase for the same reason.
The profit of the trucking firms would go down do to increased competion.
The profits would eventually reach normal profits or what economists call zero economic profit. That means they are still making a profit but just not a huge killing. I would assume that it would be an economy to scale (decreasing cost industry) because the more trucks they have the larger the network they have and the less empty loads they must pull.
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