ECON101 Lecture Notes - Lecture 9: Perfect Competition, Economic Equilibrium, Marginal Revenue

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byzantiumchinchilla984

3 Feb 2016

School

University of Alberta

Department

Economics

Course

ECON101

Professor

Jane Vallentyne

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ECON101 Full Course Notes

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Document Summary

9. 1 identify and explain the characteristics of a perfectly competitive market structure. 9. 2 using revenue and cost information, determine the firm"s short-run profit maximizing or loss minimizing level of output and profit. 9. 3 derive the firm"s short-run supply curve and explain how the short-run equilibrium price is determined in a perfectly competitive market. 9. 4 explain the features and long-run adjustments associated with long-run equilibrium in perfect competition. 9. 5 explain the three different long-run industry supply curve situations that are possible in perfect competition. 9. 6 from a social viewpoint, evaluate the long-run behaviour in perfect competition. Objective 9. 1: identify and explain the characteristics of a perfectly competitive market structure: very large number of sellers, standardized product, price taker - sellers exert no control over product price, free entry & exit. The demand curve is perfectly elastic (get the same price no. Matter what the quantity supplied) for each individual firm.

Related Questions

Which of the following is not necessarily a characteristic of perfect competition? (Points: 1)

low prices
a large number of buyers and sellers
a homogeneous product
perfect information

2. In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if (Points :1)
it is covering all of its variable cost plus part of its fixed cost

it is covering all of its fixed cost
variable cost is less than the fixed cost
fixed cost is zero

3. The golden rule of profit maximization states that any firm maximizes profit by producing where (Points :
marginal revenue equals marginal cost
demand is unit elastic, and total revenue is the greatest
price equals marginal revenue
price equals marginal cost

4. Which of the characteristics of perfect competition assures that economic profit will be zero in the long run? (Points: 1)
There are easy entry and exit in the market.
Each firm is a price taker.
Each firm has access to perfect information.
Each firm is small relative to the market.

5. A constant-cost industry is distinguished by the fact that(Points: 1)
firms' short-run average total costs are horizontal
firms' short-run marginal cost curves are horizontal
the long-run industry supply curve is perfectly elastic
the short-run industry supply curve is perfectly elastic

6. Commodity products are (Points: 1)
pasteurized
bland
perceived by consumers to be identical
made by one manufacturer

7. In a perfectly competitive industry we are likely to find(Points: 1)
firms producing a wide variety of products
barriers to entry
no profit possible in the short run
firms that do not advertise

8. Perfectly competitive firms are price takers because (Points :1)
all small firms must take the price set by the largest firm in the market
firms take the price that government determines is a "fair" price
each firm is small and goods are perfect substitutes for one another
free entry and exit in the short run creates a constant market price in the long run

9. In perfect competition, if one firm raises its price, (Points :1)
others will follow
that firm will increase its revenues
that firm will lose revenues because other firms will not follow
all consumers will be adversely affected

10. Suppose, at its present rate of output, a perfectly competitive firm's marginal revenue exceeds both its marginal cost and its average variable cost. To maximize profit, the firm should (Points: 1)
lower the price
raise the price
increase output
reduce output

tanpig844

35. Consider the following three statements about perfect competition. Which of these statements are true about a perfectly competitive industry? 1. In the long run, firms enter or exit a perfectly competitive industry in search of higher profits but all of them end up earning zero profit. II. Every firm in long run equilibrium will be exactly the right size to deliver the lowest possible average costs of production. III. As we move to the right along the short-run supply curve of the perfectly competitive industry, each firm is supplying more output to the market. (A) I only fB) II only (C) III only (D) I and II (E) I and III (F) II and 111/(G)) and II and III (H) none of the above

1. If the ATC curve is above the demand curve in a perfectly competitive firm, the firm will have a:

2. If the ATC curve is below the demand curve in a perfectly competitive firm, the firm will have a:

3. Even if in the short run, a perfectly competitive firm has a profit; in the long run, they always break even because:

- low barriers to entry