How Do Perfectly Competitive Markets Allow for the Movement of Resources

question 208

Essay

How do perfectly competitive markets allow for the movement of resources from less productive industries to more productive industries?

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Definitions:

Operating Leverage

The degree to which a firm or project relies on fixed costs.

Capital Intensive

Describes industries or businesses that require large amounts of money and equipment to produce goods or services.

Variable Costs

Expenses that fluctuate in direct proportion to changes in productive output or other measures of volume.

Operating Leverage

Operating leverage refers to the extent to which a company can increase its operating income by increasing revenue, highlighting the proportion of fixed costs in a company's cost structure.