ECO101H1 Lecture 13: Markets-Perfect Competition

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11 May 2017

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Eco100 - lecture 13 : markets - perfect competition. In every market, there is a demand curve. In perfect competition, there is also a supply curve. Exists only in perfectly competitive markets, not in other markets (i. e. monopoly) Many buyers and sellers of an identical product. Actions of single buyer/seller cannot influence mp. Firms can enter and exit entry as they wish. Perfectly elastic demand curve at market price. The number of firms is fixed in the short run, but can vary in the long run. Absence of barriers to entry: economic profits cannot persist in long run for firms. Each firm is a price taker: faces an infinitely elastic demand at mp. Example: market for organic foods (perfectly elastic industry) There is a sharp increase in demand for organic foods. Other farmers switch to organic crops, until economic profits are competed away.

Related Questions

A major difference between monopolistic competition and perfect competition is:

a. there are barriers to entry in monopolistic competition. There are no barriers to entry in perfectly competitive markets.

b. monopolistically competitive firms sell differentiated products. Perfectly competitive firms sell identical products.

c. government regulation restricts the ability of monopolistically competitive firms to change their prices. Perfectly competitive firms face no price regulation.

d. the market demand curve in a monopolistically competitive market slopes downward. The market demand curve in a perfectly competitive market is horizontal

bronzecattle701

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

- profit incentives attract new firms

- perfectly homogenous products

- all of the above

4. A perfect competitor would:

- never charge above market price but might charge below market price

- never charge below market price but might charge above market price

- always change the market price

- none of the above

5. The crucial aspect of competition among firms that leads to the condition of zero profits in the long run is

- the number of firms in the industry is fixed

- free entry and exit of firms in the industry

- fixed costs equal zero

- all costs are at their least cost level.

mauvewombat755

1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm

graygrasshopper945

ECO101H1 Lecture 13: Markets-Perfect Competition

ECO101H1 Full Course Notes

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