Question

1a) In Kirzners theory, is output (when producing) fixed in the short term?

1b) How does it differ from neoclassical in perfect competition?

Please answer the question accurately. The second question asks 'how', and I am therefore not asking for a definition, but how it differs.

Answer 1

Dear Student,

Kirzners theory is differ from neoclassical in perfect competition in following ways :

The theory of perfect competition have below restrictions

-There are so many buyers and sellers

-Each buyer and seller takes the price as given.

- All Firms produce a homogeneous output.

- Buyers and sellers have all relevant information about the market.

- Entry and exit is free.

Monopoly Theory MC MR D

In contract Kirzners below are the standard rules

-Tax policy and the two types of incentive (This distinction led Kirzner to develop another theory of incentive)

-Pure entrepreneurial profit is what is left once all the costs (including interest) to a course of action have been taken into account; it is not necessary to the existence of the good sold

-Kirzner explains that many economists support intervention because of the impossibility to achieve

the conditions described by perfect competition theory

-Regulation and economic growth (The possibility to capture profits in a stable legal environment also

contributes to economic growth. Kirzner argues that policies that stimulate the potential for discovery contribute to the growth of knowledge and thus to higher economic performance (i.e. higher factor productivity).

Thank You !!