Economics question!?

m123 · #1 (**permalink**) 04-26-2008, 10:25 PM

International markets for grain and metals are said to approximate conditions of perfect competition. Is this true in the context of one such market.

turkeystuffing_dude · #2 (**permalink**) 04-26-2008, 10:26 PM

Grain is a commodity. It is homogenous, meaning it is pretty much the same no matter who produces it. There are few barriers to entry into the grain industry - there are many people could in theory chose to grow it if they wanted to and start up costs for firms are low. There are many suppliers, which brings the price down to marginal cost, and because of competition, firms are forced to operate at minimum average cost to maximise their profit.

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