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Chapter 7: Q.2 (page 211)

Would independent trucking fit the characteristics of a perfectly competitive industry?

Short Answer

Expert verified

As a result, independent trucking fits the profile of a highly competitive business.

Step by step solution

01

Introduction

Perfect Competition refers to a market situation in which there are a large number of buyers and sellers, all of whom have perfect knowledge of the market, commodities are homogeneous, and all enterprises are price takers.

02

Explanation

Independent truckers are typically small sellers with a wide number of customers. They could be among the many other sellers that are self-employed and offer the same service of moving goods between two sites with the same type of truck. They'll all be "price takers" because they're all providing the same service.

Anyone interested in working in the industry only needs a truck and a driver's license. Those who want to leave need only sell the truck.

As a result, independent trucking fits the profile of a highly competitive business.

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Most popular questions from this chapter

Suppose that you decide to play a game. You buy stock by throwing a dice a few times, using that method to select which stock to buy. After ten months you calculate the return on your investment and the return earned by someone who followed “expert” advice during the same period. If both returns are similar, would this constitute evidence in favor of or against the efficient market hypothesis?

Visit the Bloomberg Markets website at www.bloomberg .com/markets/stocks. Their interactive graph allows you to see cumulative returns for individual stocks as well as market indices. Over the last five years, which of the three indices appears the most volatile––the S&P 500 (SPX:IND), the Dow Jones Industrial Average (INDU:IND), or the NASDAQ Composite (CCMP:IND)? Which index would have been the best investment if compounded over the last five years?

Compute the price of a share of stock that pays a \(5per year dividend and that you expect to be able to sell in one year for \)40, assuming you require a 5%return.

If monetary policy becomes more transparent about the future course of interest rates, how will stock prices be affected, if at all?

The Internet is a great source of information on stock prices and stock price movements. Yahoo Finance is a great source for stock market data. Go to http://finance .yahoo.com and click on “Markets,” then “World Indices,” and then the DJI symbol to view current data on the Dow Jones Industrial Average. Click on the chart to manipulate the different variables. Change the time range and observe the stock trend over various intervals. Have stock prices been going up or down over the past day, week, three months, and year?
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