ECON 1200 Chapter Notes - Chapter 4: Demand Curve, Perfect Competition, Normal Good

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carminebear339

28 Feb 2016

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Chapter 4: supply & demand are the forces that make market economies work (they determine the quanity of each good produced & price @ which it is sold) Market & compeiion: terms supply & demand refer to the behavior of people as they interact w/ one another in compeiive markets. What is a market: market: group of buyers & sellers of a paricular good/service. Buyers determine demand for product while sellers determine supply of product. Markets take many forms (some highly organized, some not as much) Goods ofered for sale are all exactly the same. Buyers & sellers so numerous that no single buyer/seller has any inluence over market price (buyers & sellers are price takers must accept price the market determines: not all goods sold in perfectly compeiive markets. Some markets have 1 seller & seller sets price (monopoly) Most markets fall between perfect compeiion & monopoly.

Related Questions

A competitive market is one in which:

a. is only one seller, but many buyers.

b. are many sellers, and each has the ability to set the price of his product.

c. are many sellers and compete with one another in such a way that some sellers are always being forced out of the market.

d. are so many buyers and so many sellers that each has a negligible impact on the price of the product.

lilacferret935

1. Characteristics of competitive markets

The model of competitive markets relies on these three core assumptions:

1.	There must be many buyers and sellers a few players can't dominate the market.
2.	Firms must produce identical products buyers must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing free entry into and exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Scenario	Competitive?
The government has granted the U.S. Postal Service the exclusive right to deliver mail.	________________
Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.
Two taxi companies serve most of the market in a big city. Consumers don't care about which taxi company they take if they decide it's worth taking a taxi, they flag down the nearest one.	_________________
There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer available to

copperhamster111

13. One of the limitations of Five Forces is that:

a. These tools reduce producer surplus

b. For one firm to increase profit, it takes it from other participants in the industry

c. Does not provide a firm with sustainable competitve advantage

d. both b & c.

15. All these are characterisctics of a monopoly except,

a. There is one seller of the product

b. Has few substitutes

c. Controls a large share of the market

d. Controls a small share of the market

22. Industries with high barriers to entry

a. Pushes profits to normal returns

b. increases the likelihood of firms entering the industry

c. help firms sustain profits

d. increases the number of competitors

14. How does Ebay differ from an economist's view of a perfect competitve market?

a. Ebay has few buyers whereas perfect competitve industry assumes many buyers

b. Ebay has few sellers whereas perfect competitve industry assumes many sellers

c. There is limited information in ebay whereas perfect competitive industry assumes full information for both buyers and sellers

d. There is no difference between these two markets

26. Low cost strategies are usually found in industries where

a. Products are not particularly differentiated

b. Price competion tends to be fierce

c. Both a and b

d. None of the above

Cigarettes - Price Elasticity of demand = - 0.67

A. Cigarettes

B. Alcohol

C. Sodas

D. None of the above

2. The demand for insulin will be ______________ than the demand for a Caribbean cruise in general

a. More elastic

b. More inelastic

c. Less elastic

d. Less inelastic

ECON 1200 Chapter Notes - Chapter 4: Demand Curve, Perfect Competition, Normal Good

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