ECO101H1 Lecture Notes - Marginal Revenue, Perfect Competition, Demand Curve

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Topic 8 perfect competition (week eight nov 1st - nov 10th) Outline: definition, total revenue, marginal revenue, and average revenue, profit maximizing output. - firm"s mc curve = firm"s ss curve (if p > avc); - shut down point: level of profits, entry and exit, short-run and long-run impact of a shift in demand, long-run market supply curve; - many buyers and sellers of identical product (so action of each buyer or seller exerts no impact on the market price); - freedom of entry and exit of firms (no barrier to entry/exit) - each firm is a price taker, meaning each firm faces an infinitely elastic demand curve at the market price; -- in the short run, the number of firms is fixed; In the long run, the number of firms can vary. Total revenue (the revenue of producing an additional unit of output) Dd/ss market demand/supply dd/ss individual firm"s demand/ market price supply.

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

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

In a perfectly competitive market, assume every firm faces the same short run total cost curve: TC= 2q^2 + 10q + 200. The market demand curve is :Qd = 800-8P. Given perfect competition, if this industry is in long run equillibrium:

1) Find the level of output produced by each firm

2) Find the market price of the output.

3) Find the total industry output adn the number of firms in the market.

4) How much economic profit does each firm in this market make?

sangriahare446

ECO101H1 Lecture Notes - Marginal Revenue, Perfect Competition, Demand Curve

ECO101H1 Full Course Notes

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