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ECON 208 Chapter Notes - Chapter 9: Longrun, Average Variable Cost, Perfect Competition

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crimsonlion777
10 Nov 2015
School
McGill University
Department
Economics
Course
ECON 208
Professor
Mayssun El- Attar Vilalta

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ECON 208 Full Course Notes
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ECON 208 Full Course Notes
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Document Summary

Competitive behaviour the degree to which individual rms actively vie with one another for business. Market power the ability of a rm to in uence the price of a product of the terms under which it is sold. Perfect competition a market structure in which all rms in an industry are price takers and in which there is freedom of entry and exit from an industry. Homogenous product every unit of the product is identical to every other unit, in the eyes of purchasers. Price taker a rm that can alter its rate of production and sales without affecting the market price of its product. Total revenue (tr) total receipts from the sale of a product. Average revenue (ar) market price when all units are sold at the same price; total revenue divided by quantity sold. Marginal revenue (mr) the change in a rm"s total revenue resulting from a change in its sales by one unit.

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Related Questions

70) In a monopolistically competitive industry, the long-run equilibrium output corresponds to the tangency of the firm's LRAC and its demand curve. This output is also where marginal revenue equals marginal cost because A) firms will have negative profits at any other level of output. B) the average total cost is equal to average revenue at that output. C) firms are price takers in this market structure. D) marginal cost is above price. E) firms prefer it this way.

Match the following.

constant-cost industry A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry The demand facing a price-taking firm.
long-run equilibrium A firm produces zero output but must still pay its fixed costs.
marginal revenue product Price below which a firm shuts down in the short run.
perfect competition All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand Industry in which input prices rise as all firms in the industry expand output.
shut down Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price The additional revenue earned by hiring one more unit of a variable input.

 

A. A competitive firm

  1. can consider only its location in setting the price.
  2. must base its competitive price on product differentiation.
  3. has the ability to set its own price.
  4. must accept the price determined by the intersection of the market supply and demand curves.
  5. has no supply curve.

B. If a firm is making an economic profit, then

  1. the factors of production are being paid their opportunity costs.
  2. there will be no change in the number of firms if the industry is perfectly competitive.
  3. the factors of production are being paid less than their opportunity costs.
  4. the factors of production are being paid more than their opportunity costs.
  5. the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

  1. marginal revenue is greater than price.
  2. the elasticity of demand is constant.
  3. marginal revenue decreases when the price decreases.
  4. 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

  1. shut down because economic profits are negative.
  2. continue to produce as long as P > AVC.
  3. continue to produce because accounting profits are positive.
  4. set a higher price for its output.
  5. set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

  1. the marginal revenue curve.
  2. perfectly inelastic.
  3. always equal to marginal cost.
  4. the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

  1. monopolistic
  2. oligopolistic
  3. monopolistically competitive
  4. perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

  1. total revenue will fall if the price increases.
  2. total revenue will be unchanged if the price increases.
  3. total revenue will rise if the price increases.
  4. the total supply will increase by an equal amount if demand increases.
  5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

  1. monopoly.
  2. perfect competition.
  3. theories of consumer behavior.
  4. imperfect competition.
  5. the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

  1. perfect competition
  2. monopolistic competition
  3. oligopoly
  4. monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

  1. economic profits are zero.
  2. TR > TC.
  3. TR < TC.
  4. P = AVC.
  5. normal profits are zero.