And why use perfectly competitive markets, which don’t exist, as part of an explanation? Just another reason that non-economists conclude that economists are somewhat bonkers.
It's true that it is a 'very strong' assumption, making it hard to suspend disbelief about it. Regardless, in this case the issue is that even if we were to accept the perfectly competitive assumption , the proposed answer is not correct.
Because mathematically modelling it otherwise to test the structure of an underlying general equilibrium is hard and harder to explain to the layperson...,and it's better to start somewhere like " perfect competition "and then proceed by relaxing assumptions .....that way the treatment is consistent and hopefully as complete as possible.
As a question for students in and Econ 101 class it is ok, an opportunity to demonstrate the ability to manipulate the simple concepts they ought to have learned. [I though Lindbergh's answer was pretty obvious, so much so that I was looking for a trick whihc would make pear the answer. :)] But yes, it would be better to ask it more open-endedly. Which one and why?
Very helpful. I'm working on developing a new test of broad-based economic thinking now, so I'll keep this post in mind and avoid gotchas.
And why use perfectly competitive markets, which don’t exist, as part of an explanation? Just another reason that non-economists conclude that economists are somewhat bonkers.
It's true that it is a 'very strong' assumption, making it hard to suspend disbelief about it. Regardless, in this case the issue is that even if we were to accept the perfectly competitive assumption , the proposed answer is not correct.
Because mathematically modelling it otherwise to test the structure of an underlying general equilibrium is hard and harder to explain to the layperson...,and it's better to start somewhere like " perfect competition "and then proceed by relaxing assumptions .....that way the treatment is consistent and hopefully as complete as possible.
As a question for students in and Econ 101 class it is ok, an opportunity to demonstrate the ability to manipulate the simple concepts they ought to have learned. [I though Lindbergh's answer was pretty obvious, so much so that I was looking for a trick whihc would make pear the answer. :)] But yes, it would be better to ask it more open-endedly. Which one and why?