ECN 104 Lecture Notes - Lecture 10: Perfect Competition, Market Power, Marginal Revenue

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bronzeeel343

14 Feb 2018

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Four market structures: perfect competition, monopoly, monopolistic competition, oligopoly. Characteristics of perfect competition: large number of firms, standardized product, price takers, easy entry and exit. Demand for a firm in perfect competition: firm is a price taker, demand is perfectly elastic. ____________ demand: average, total, and marginal revenue, avg revenue = tr/q = p, marginal revenue = change in tr / change in q = p, total = price x quantity. Demand and revenue curves in perfect competition: demand is perfectly elastic since the firm can sell as much output as it wants at the market price. Profit maximization: perfectly competitive firms can maximize profits (and eliminate losses) only, two approaches: by adjusting output, total revenue total cost approach, marginal revenue marginal cost approach. Loss minimizing cases: suppose price falls from to , loss = (atc price) x q, 91. 67>81, per unit loss = 10. 67, total average cost: for 6 units.

Related Questions

A. A competitive firm

can consider only its location in setting the price.
must base its competitive price on product differentiation.
has the ability to set its own price.
must accept the price determined by the intersection of the market supply and demand curves.
has no supply curve.

B. If a firm is making an economic profit, then

the factors of production are being paid their opportunity costs.
there will be no change in the number of firms if the industry is perfectly competitive.
the factors of production are being paid less than their opportunity costs.
the factors of production are being paid more than their opportunity costs.
the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

shut down because economic profits are negative.
continue to produce as long as P > AVC.
continue to produce because accounting profits are positive.
set a higher price for its output.
set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

the marginal revenue curve.
perfectly inelastic.
always equal to marginal cost.
the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

monopolistic
oligopolistic
monopolistically competitive
perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

total revenue will fall if the price increases.
total revenue will be unchanged if the price increases.
total revenue will rise if the price increases.
the total supply will increase by an equal amount if demand increases.
the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

monopoly.
perfect competition.
theories of consumer behavior.
imperfect competition.
the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

perfect competition
monopolistic competition
oligopoly
monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

economic profits are zero.
TR > TC.
TR < TC.
P = AVC.
normal profits are zero.

brownlouse308

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

all of the time
some of the time
on rare occasions
none of the time

2. Economics Profit is:

the same as accounting profit
sales minus explicit costs and implicit costs
sales minus variable costs and fixed costs
opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

monopoly
oligopoly
perfect competition
monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

identical products
perfect mobility
perfect knowledge
price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

true
false

emeraldwombat313

Match the following.

constant-cost industry	A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry	The demand facing a price-taking firm.
long-run equilibrium	A firm produces zero output but must still pay its fixed costs.
marginal revenue product	Price below which a firm shuts down in the short run.
perfect competition	All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand	Industry in which input prices rise as all firms in the industry expand output.
shut down	Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price	The additional revenue earned by hiring one more unit of a variable input.

viridianhare336

ECN 104 Lecture Notes - Lecture 10: Perfect Competition, Market Power, Marginal Revenue

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