ECON1001 Lecture 7: ECON1001-Lecture-7-Notes

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browngrasshopper715

13 Aug 2018

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Characteristics of perfect competition: many buyers and sellers. All buyers and sellers are a very small part of the total market: homogeneous products. Consumers are indifferent as to who they purchase from. All firms have access to the same technology: price taker. No individual has sufficient market power to influence market prices that is, every participant is a price taker: free entry and exit. Firms can freely (that is, costlessly) enter and exit the market in the long run there are no barriers to entry in the long run. In deciding thee level of output to produce in the short run, a firm will ignore its fixed costs. If a fir(cid:373) produ(cid:272)es output, it(cid:859)s suppl(cid:455) (cid:272)urve is give(cid:374) (cid:271)(cid:455) its (cid:373)arginal cost curve. If a firm chooses not to produce output in the short run, we say that the firm shuts down. If price falls below avc, a firm will shut down.

Related Questions

What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be:

A. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.

B. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market

C. many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market.

D. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.

E. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market.

amberhamster945

1. How is a monopolistically competitive market similar to a perfectly competitive market?

A. There are no restrictions on the entry of new firms.

B. Both have differentiated products with close substitutes.

C. Producers with market power set their own prices.

D. Both have homogeneous products with no close substitutes.

2. Which of the following common features do monopolistically competitive markets, and monopolies share?

A. Barriers restrict new firms from entering.

B. Firms face downward-sloping demand curves.

C. Consumers with market power set prices.

D. Producers with no market power set their own prices.

ceruleancicada74

13. One of the limitations of Five Forces is that:

a. These tools reduce producer surplus

b. For one firm to increase profit, it takes it from other participants in the industry

c. Does not provide a firm with sustainable competitve advantage

d. both b & c.

15. All these are characterisctics of a monopoly except,

a. There is one seller of the product

b. Has few substitutes

c. Controls a large share of the market

d. Controls a small share of the market

22. Industries with high barriers to entry

a. Pushes profits to normal returns

b. increases the likelihood of firms entering the industry

c. help firms sustain profits

d. increases the number of competitors

14. How does Ebay differ from an economist's view of a perfect competitve market?

a. Ebay has few buyers whereas perfect competitve industry assumes many buyers

b. Ebay has few sellers whereas perfect competitve industry assumes many sellers

c. There is limited information in ebay whereas perfect competitive industry assumes full information for both buyers and sellers

d. There is no difference between these two markets

26. Low cost strategies are usually found in industries where

a. Products are not particularly differentiated

b. Price competion tends to be fierce

c. Both a and b

d. None of the above

Cigarettes - Price Elasticity of demand = - 0.67

A. Cigarettes

B. Alcohol

C. Sodas

D. None of the above

2. The demand for insulin will be ______________ than the demand for a Caribbean cruise in general

a. More elastic

b. More inelastic

c. Less elastic

d. Less inelastic

ECON1001 Lecture 7: ECON1001-Lecture-7-Notes

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