ECN 104 Chapter Notes - Chapter 14: Sunk Costs, Marginal Revenue, Perfect Competition

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jadegnat800

14 Nov 2011

School

Ryerson University

Department

Economics

Course

ECN 104

Professor

Tsogbadral Galaabaatar

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Introduction: a scenario: three years after graduation, you run your own business, you must decide how much to produce, what price to charge, how, what factors should affect these decisions? many workers to hire, etc. How much competition you face: we begin by studying the behaviour of firms in perfectly competitive markets, characteristics of perfect competition, 1. The goods offered for sale are largely the same: 3. If shutdown in short run, must still pay fc. Shut down if p < avc: a competitive firm"s short-run supply curve, the irrelevance of sunk costs. > atc: the competitive firm"s supply curve, the firm"s long-run supply curve is the portion of its mc curve above. Lratc (long-run average total cost: market supply: assumptions, 1. All existing firms and potential entrants have identical costs: 2. Each firm"s costs do not change as other firms enter or exit the: 3. The number of firms in the market is: market.

Related Questions

1)What is a perfectly competitive market?

2)What is marginal revenue? How is it related to total and average revenue?

champagnemoose914

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

2. âThe short run individual supply curve of a perfectlycompetitive firm is the firmâs marginal cost curve.â

Carefully explain the two exceptionsto the statement above.

3. Suppose that, in a perfectly competitive market at the profitmaximizing quantity, the market price is greater than average totalcost. Carefully explain what willhappen to the number of firms, the market supply and the price ofthe good as we move from the short run to the longrun.

crimsonbear193

ECN 104 Chapter Notes - Chapter 14: Sunk Costs, Marginal Revenue, Perfect Competition

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