EC260 Chapter Notes - Chapter 7: Variable Cost, Demand Curve, Reservation Price

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greenseal220

6 Sep 2016

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Market structure affects the pricing power of a firm so we define markets based on their degree of pricing power. On one end of the spectrum lies the perfectly competitive market in which managers have no market power. At the other end of the spectrum lies the monopoly situation where managers face no competition and as a result they have lots of market power type of product being sold. Market structure is determined by: number of firms present. 2: pricing power of firm, barriers to entry, non-price competition. Market price is determined by the intersection of the market demand curve and the market supply curve. Sub q = 24 into demand or supply: Likewise a demand shift will affect the price in a perfectly competitive market. Demand would shift to the right if income increased; market price would rise. The output decision of a perfectly competitive firm.

Related Questions

A major difference between monopolistic competition and perfect competition is:

a. there are barriers to entry in monopolistic competition. There are no barriers to entry in perfectly competitive markets.

b. monopolistically competitive firms sell differentiated products. Perfectly competitive firms sell identical products.

c. government regulation restricts the ability of monopolistically competitive firms to change their prices. Perfectly competitive firms face no price regulation.

d. the market demand curve in a monopolistically competitive market slopes downward. The market demand curve in a perfectly competitive market is horizontal

bronzecattle701

11-Short-run costs which increase and decrease as an output increases or decreases are called: a.Variable costs b.Secondary costs c.Derived costs d.Partial costs e.Potential costs 12.The addition to total cost resulting from the addition of the last unit of output is called the: a.Total variable cost b.Average variable cost c.Fixed cost d.Implicit cost e.Marginal cost 13.The fact that a single large factory may be more efficient than several smaller factories of the same total capacity is a reflection of: a.Increasing returns of scale. b.The law of diminishing marginal returns c.Comparative advantage d.The crowding-out effect e.Reproduction cost of assets 14.A possible reason for the existence of increasing return to scale is: a.The inability of a firm to increase all inputs proportionally b.Problems of coordination and control c.Higher input prices d.Larger fixed costs with a larger plant size. e.Greater specialization 15.The model of perfect competition is useful because: a.Most firms in the real world are perfectly competitive b.Perfectly competitive firms exert significant perfect competition. c.Government regulation is designed to eliminate perfect competition. d.It is a model of an ideal world which sheds much light on a market structureâs effects on resources allocation e.Advertising agencies are heavily dependent on the advertising dollars of perfectly competitive firms 16.A market consisting of many firms producing homogeneous products, having complete knowledge of relevant information, no power over the productâs market price, and low barriers to entry is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above markets 17.A market consisting of many firms, low barriers to entry, some control over price, but considerable non-price competition is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above. 18.A market consisting of a few firms producing similar products with significant barriers to entry is characteristic of: a.Perfect completion. b.Monopoly c.Monopolistic competition. d.Oligopoly e.None of the above

harlequinwhale491

You have been hired as a consultant by your local mayor to look at the various market structures. Your role is to provide analysis and answers to these important questions that will help the mayor understand the structures of many of the businesses in his city: Describe each market structure discussed in the course (perfect competition, monopolistic competition, oligopoly, and monopoly) and discuss two of the market characteristics of each market structure. Identify one real-life example of a market structure in your local city and relate your example to each of the characteristics of the market. Describe how high entry barriers into a market will influence the long-run profitability of the firms. Explain the competitive pressures that are present in markets with high barriers to entry. Explain the price elasticity of demand in each market structure and its effect on the pricing of its products in each market. Describe how the role of the government affects each market structure's ability to price its products. Discuss the effect of international trade on each market structure.

grayfox355

EC260 Chapter Notes - Chapter 7: Variable Cost, Demand Curve, Reservation Price

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