1. Explain the importance of free-entry and free-exit market conditions, and perfect access to market relevant information, when determining the long-run level of a firm’s total profit (above-normal, normal or below-normal) in pure competition. Finally, what does the McGuigan textbook (Chapter 10) say happens to the efficiency of perfectly competitive markets when there is asymmetric information among market participants?
2. Economists consider the end-results of allocative efficiency and productive efficiency in pure competition to be beneficial outcomes for the entire economy. To answer this question, discuss how allocative efficiency differs from productive efficiency, and why each of these outcomes is desirable from an economy-wide perspective.
3. Compare and contrast the market conditions, market power and market outcomes that distinguish monopolistic competition from pure competition. How are the efficiency end-results of monopolistic competition different from those of pure competition? In your answer, discuss how economists view the desirability of the economic efficiency end-results in monopolistic competition.
4. In Chapter 10, the McGuigan textbook examines the concepts of competitive strategy, sustainable competitive advantage, core competencies and industry analysis. Explain the meaning of each of these concepts. How are these concepts all logically-connected to each other?
5. When analyzing the short-run decision-making of firms, economists argue that it is not always rational to temporarily shut-down a production plant when the industry’s product price falls below the average total cost of production. Instead, economists recommend that managers perform “shutdown point analysis” before making any decisions to continue production or shut down operations. Completely explain the economic rationale behind shutdown point analysis.