ECO 1104 Chapter 14: Chapter 14

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3 characteristics of a competitive market/perfectly competitive market. There are many buyers and sellers in the market price takers. The goods offered by the various sellers are very much the same. Firms can freely enter or exit the market (firms don"t have to be price takers) Powerful force in shaping long run equilibrium. Firms in competitive markets aim to maximize revenue. Since firms are price takers, it doesn"t matter how much output they produce, price will be constant. Total revenue is proportional to the amount of output. Average tells us how much revenue a firm receives per unit sold. For all firms, average revenue equals the price of the good. For all firms marginal revenue equals the price of the good, in competitive firms. Tells us the change in total revenue from the sale of an additional unit (cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1842) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) (cid:1874) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) (cid:1844)=(cid:3017) (cid:3018)(cid:3018) = p (cid:1866) (cid:1844)(cid:1874)(cid:1866)(cid:1873)=(cid:1867)(cid:1872) (cid:1844)(cid:1874)(cid:1866)(cid:1873) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) Mr > mc, increase in milk production.

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.

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.

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

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ECO 1104 Chapter 14: Chapter 14

ECO 1104 Full Course Notes

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