ECO 211 Chapter Notes - Chapter 6: Takers, Opportunity Cost, Demand Curve

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ECO 211 Full Course Notes

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Chapter 6 notes: conditions of a perfectly competitive markets, no buyer or seller is big enough to influence the market price. Fixed factor of production an input that cannot cha(cid:374)ge i(cid:374) the sho(cid:396)t (cid:396)u(cid:374) (cid:894)ph(cid:455)si(cid:272)al (cid:272)apital; (cid:272)a(cid:374)"t build a factory overnight: marginal production the change in total output associated with using one more unit of input. Let"s sa(cid:455) o(cid:374)e e(cid:373)plo(cid:455)ee (cid:272)a(cid:374) (cid:272)o(cid:373)plete (cid:1005)(cid:1004)(cid:1004) (cid:271)o(cid:454)es i(cid:374) o(cid:374)e da(cid:455) a(cid:374)d addi(cid:374)g a se(cid:272)o(cid:374)d e(cid:373)plo(cid:455)ee can complete 207 boxes in one day. Variable cost the (cid:272)ost of (cid:448)a(cid:396)ia(cid:271)le fa(cid:272)to(cid:396)s of p(cid:396)odu(cid:272)tio(cid:374), (cid:449)hi(cid:272)h (cid:272)ha(cid:374)ge alo(cid:374)g (cid:449)ith a fi(cid:396)(cid:373)"s output. Fixed cost the cost of fixed factors of production, which a firm must pay even if it produces zero output (electricity, wages, etc. ) Fixed costs do not vary in the short-run, but variable costs do: total cost/q = variable cost/q + fixed cost/q (q is the quantity produced)

Related Questions

Can you tell the difference between a grain of rice from one farm from another grain from a different farm? Chances are you can't. And it's markets like this - with identical goods that leave producers to be price takers (rather than having some/much control of their price and quantity combination), and also where entry into and exit from the market are relatively easy, that the economy is supposed to work at its best. Examining how a producer in such a market structure maximizes its profit, why is this type of market structure deemed to be the most efficient and optimal?

azuremammoth327

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

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 an identical product buyer must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing for 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 behaviour, 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.

Is the scenario	Competitive?
Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.
In a major metropolitan area, one chain of coffee shops has gained a large market share because customers feel its coffee tastes better than that of its competitors.
Scholastik Inc. owns the U.S. copyright to a popular book series. It is the only company with the legal right to publish books in the series in the United States.
In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.

amberfly263

ECO 211 Chapter Notes - Chapter 6: Takers, Opportunity Cost, Demand Curve

ECO 211 Full Course Notes

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