ECON281 Lecture Notes - Lecture 24: Competitive Equilibrium, Perfect Competition, Economic Equilibrium

22 views3 pages

sangriaoyster229

6 Mar 2019

School

University of Alberta

Department

Economics

Course

ECON281

Professor

Lorne Priemaza

For unlimited access to Class Notes, a Class+ subscription is required.

indigooyster65 and 18 others unlocked

ECON281 Full Course Notes

Verified Note

24 documents

Document Summary

Perfect competition results in a single, equilibrium price that no one consumer or firm can influence. Economists include implicit costs in their economic profits (accountants do not) Total cost (tc) depends on total output (q) Marginal revenue is the change in total revenue from one additional output (q) A firm will produce where mr = mc. A firm"s supply curve is its mc curve above its shut-down point. A firm will operate if it can cover its variable costs. In the sr, this could cause a loss. In the lr, costs can vary with the entry of firms. Skilled workers produce economic rent, which is often captured by higher wages. Producer surplus is the area between price and the supply curve. In the long run, producer surplus is captured by skilled workers. Often government intervene in markets, even perfectly competitive markets, for a variety of reasons. In this chapter we"ll use partial equilibrium analysis.

Related Questions

QUESTION 22

For a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which

	a.	MR = MC.
	b.	MR = AVC.
	c.	P = ATC.
	d.	MR = ATC.

4 points

QUESTION 23

If MR > MC, then

	a.	profits are being maximized.
	b.	the firm is producing too much of the good to be maximizing profits.
	c.	the firm can increase its profits (or minimize its losses) by increasing output.
	d.	the firm must be incurring losses.

4 points

QUESTION 24

If firms are earning zero economic profits, they must be producing at an output level at which

	a.	price minus marginal cost.
	b.	total revenue equals total costs, in other words, normal profits.
	c.	price equals average variable cost.
	d.	marginal revenue equals marginal cost.
	e.	none of the above

4 points

QUESTION 25

In the theory of perfect competition,

	a.	the market demand curve is horizontal.
	b.	the single firm faces a horizontal demand curve.
	c.	the single firm faces a downward-sloping demand curve.
	d.	the market demand curve is downward sloping.
	e.	b and d

azureshark954

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

34. All firms in an industry have the same costs. Assume that all other firms in the industry are in short-run equilibrium. However, at the current level of output of one particular firm, AC-MC>P-MR>AVC. If nothing changes, this firm should: (A) decrease its output. (B) increase its output. (C) keep output constant. (D) shut down in the short run. ((E) decrease output in the short run and shut down in the long run. (F) increase output in the short run and shut down in the long run. (G) adjust output until Total Revenue = Total Cost. (H) produce where the marginal cost curve just cuts the demand curve in the short and long run. (1) none of the above.

ECON281 Lecture Notes - Lecture 24: Competitive Equilibrium, Perfect Competition, Economic Equilibrium

ECON281 Full Course Notes

Document Summary

Get access

Related Documents

ECON281 Chapter 9: Chapter 9 NOTES.docx

ECON281 Lecture 9: Econ 281 - Lecture 9.docx

ECON281 Lecture Notes - Lecture 23: Profit Maximization, Economic Equilibrium, Competitive Equilibrium

Related Questions