ECON 1110 Lecture Notes - Normal-Form Game, Joseph Schumpeter, Takers

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18 Apr 2013

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Out cost curves remain the same, but different types of markets have different revenue structures. No firm in industry is large enough to change the production price by changing output so firms are small. So, in the longer term, perfect competition firms tend to break even. Of course, things would be different if the firm was a monopoly. Firm can set price but must accept the fact that qtyd will adjust accordingly to new price. Creative in the sense that new products were being invented, destruction b/c people would eventually get around the barriers to entry and monopoly will break down. This is an industry characterized by such economies of scale large enough so that only one firm can cover its costs while producing at minimum efficient scale. In this case there is a natural entry barrier. Only works if reselling of product is stopped. All firms have same tech knowledge, same cost curves freedom of entry and exit.

Related Questions

1. If the ATC curve is above the demand curve in a perfectly competitive firm, the firm will have a:

2. If the ATC curve is below the demand curve in a perfectly competitive firm, the firm will have a:

3. Even if in the short run, a perfectly competitive firm has a profit; in the long run, they always break even because:

- low barriers to entry

- profit incentives attract new firms

- perfectly homogenous products

- all of the above

4. A perfect competitor would:

- never charge above market price but might charge below market price

- never charge below market price but might charge above market price

- always change the market price

- none of the above

5. The crucial aspect of competition among firms that leads to the condition of zero profits in the long run is

- the number of firms in the industry is fixed

- free entry and exit of firms in the industry

- fixed costs equal zero

- all costs are at their least cost level.

mauvewombat755

If I were to open a business, I would choose the monopolistic competitive market.

Under monopolistic competition, with low barriers to entry and low capital requirements, firms are free to enter into or exit from the industry at any time. In addition, in monopolistic competition, large numbers of sellers offer closely related but not homogeneous products. This is the reason why each firm has a limited share of the market and has limited control over the market price. Thus, changes in one firmâs output have only a slight impact on market price or it also means that firms in monopolistic competition are price setters rather than price takers. In the short run, firms can make excess economic profits. However, as barriers to entry are low, other firms have an incentive to enter the market, increasing the competition, until overall economic profit is zero.

In order to yield the greatest profit, a firm engaged in monopolistic competition will focus on product quality, location, service, and advertising, since the major tool of competition is product differentiation. For example, if I opened a restaurant, the restaurant would have a menu with different dishes and different prices to other restaurants nearby and the prices of the dishes also would depend on its location, the food ingredients, the food quality, and the speed of service. With the purpose of gaining profit for the restaurant, I would try to be dynamically efficient, innovative and develop new ways to attract and retain local custom as well as maintain cost efficiency, which could keep the cost below the average profit.

I need a peer reply for this discussion and it should be 250 at least

bronzefrog162

1. if the government attempts to break up a natural monopoly to enforce competition in an industry

A. the average cost of producing the good will increase

B. the smallest firm will have a significant cost advantage over the larger, less efficient firms

C. the average cost of producing the good will decrease

D. the price paid by consumers will be expected to remain the same.

2. which statement is true?

A. the monopolistic competitor always makes a profit in the short run

B. the monopolistic competitor operates at peak efficiency

C. product differentiation takes place in the minds of the buyers

D. none of these statements is true

3. Price discrimination

A. occurs when a good or service is resold

B. is prohibited by law

C. occurs when a seller charges two or more prices for the same good or service

D. occurs when the seller charges different prices for different quality products

4. Monopolistic competition may lead to each of the following except

A. inefficiency

B. overdifferentiation

C. overcapacity

D. monopoly profits

5. In the long run in monopolistic competition

A. most firms are making a profit

B. the absence of entry barriers ensures that there are no profits

C. economies of scale ensure that there are no profits

D. most firms are losing money

6. Price discrimination means

A. charging different prices for identical goods that have identical production costs

B. paying wages according to race or sex rather than productivity

C. exploiting the working masses by charging the highest single price possible.

D. eliminating all costs so that only pure profits are realized

7. The definition of monopolistic competition includes

A. few firms and ease of entry and exit

B. few firms and barrieres to entry and exit

C. many firms and barriers to entry and exit

D. many firms and ease of entry and exit

8. Which statement is true?

A. there are many firms in a monopolistically competitive industry.

B. monopolistic competitors produce an identical product

C. in order for product differentiation to take place, there must be clear physical differences amont the products sold

D. none is true

9. Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in perfect competition in that

A. price equals minimum possible average total cost

B. price equals marginal cost

C. marginal revenue equals average total cost

D. price equals average total cost

10. Which statement is false?

A. Oligopolies are illegal in most states

B. most oligopolies engage in outright collusion

C. Ford motor company is an oligopoly

D. none of these statements is false

ECON 1110 Lecture Notes - Normal-Form Game, Joseph Schumpeter, Takers

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