ECON 110 Chapter Notes - Chapter 9: Average Variable Cost, Marginal Revenue, Perfect Competition

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Competitive behaviour: competitive behaviour refers to the degree to which individual firms actively compete with one another for business. 9. 2 the theory of perfect competition: perfect competition is a market structure in which all firms are price takers, and there is freedom of entry into and exit from the industry. All the firms in the industry sell an identical product, homogenous product: 2. Consumers know the nature of the product being sold and the prices charged by the firms: 3. The level of each firm"s output as which its long-run average cost reaches a minimum is small relative to the industry"s total output, firm"s size is small relative to the size of the industry: 4. The industry is characterized by the freedom of entry and exist. 9. 3 short-run decisions: = tr - tc, assumption that the firm"s objective is to maximize profits. Existing firms must be maximizing their profits, given their existing capital, therefore mc = mr: 2.

Related Questions

25. One difference between perfect competition and monopolistic competition is A) firms in a perfectly competitive market produce similar but slightly different products. B) in perfect competition, the product produced has no close substitutes. C) monopolistic competition has barriers to entry, whereas perfect competition has none. D) a small number of firms compete in a monopolistically competitive market and a large number of firms compete in a perfectly competitive market. E) firms in monopolistic competition have some degree of market power.

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

all of the time
some of the time
on rare occasions
none of the time

2. Economics Profit is:

the same as accounting profit
sales minus explicit costs and implicit costs
sales minus variable costs and fixed costs
opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

monopoly
oligopoly
perfect competition
monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

identical products
perfect mobility
perfect knowledge
price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

true
false

emeraldwombat313

1. Which of the following is a firm in a perfectly competitive market?

1) a local corn farmer

2) the Tennessee Valley Authority, a large electricity producer that serves areas of five states

3) pizza delivery

4) a grocery store

5) Kate Spade, fashion designer

2. Compare a perfectly competitive market with a monopolistically competitive market.

The markup the firm charges in a monopolistically competitive market is ___________ the markup charged by a firm in a perfectly competitive market.

The firm's excess capacity in a monopolistically competitive market is ___________ the firm's excess capacity in a firm in a perfectly competitive market.

The efficiency of a monopolistically competitive market is ___________ the efficiency of a perfectly competitive market.

1)greater than; less than; greater than

2)greater than; greater than; less than

3)less than; less than; greater than

4)greater than; less than; equal to

3. In the long run, how is price related to marginal cost in both perfect competition and in monopolistic competition?

1) The long-run price is driven to marginal cost in both competitive markets and markets that are monopolistically competitive.

2 )Both markets can charge more than the marginal cost in the long run because products are differentiated in both markets.

3) Products are identical in perfectly competitive markets, so a firm must charge less than the marginal cost in order to differentiate itself. This is not true in monopolistically competitive markets where firms can charge more than marginal cost.

4) Because monopolistically competitive firms have market power, they set a price higher than marginal cost, while competitive firms cannot.

4. Titleist has an advertising slogan is "The #1 ball in golf" Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.

Which producer has a stronger incentive to maintain quality control in the production of golf balls?

1) Titleist

2) a manufacturer of generic golf balls

ultramarinebeaver27

ECON 110 Chapter Notes - Chapter 9: Average Variable Cost, Marginal Revenue, Perfect Competition

ECON 110 Full Course Notes

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