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Baye suggests some ways to assess markets. Choose any market that you’d like and assess the...

Baye suggests some ways to assess markets. Choose any market that you’d like and assess the concentration of firms and its impact on competition. ~1-2 pages.

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Answer - I choose the perfectly competitive market for assesment. In this market structure , there are a large number of buyers and sellers . The sellers sell the homogenous products which cannot be differentiated. The firms earn only the normal profits which means that they are the price takers and charge the price where MR = MC. If the firms in the short run charge the price which is greater than level of MR = MC , it means that the firms are earning the positive economic profits. In such condition , other firms will be attracted to enter into the market . This will reduce the profit and demand of the other firms and in long run , they will only be able to earn the normal profits .

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