ECO100Y5 Lecture Notes - Lecture 9: Taipei Metro, Sunk Costs, Marginal Revenue

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Market power: the ability of a firm to influence the price of its product. Competitiveness of the market: the degree to which individual firms lack market power. The less power an individual firm has to influence the market price, the more competitive is that market"s structure. Perfectly competitive market: a market where there is no need for individual firms to compete actively with one another because none has any power over the market (eg. wheat farmers) Each firm in a perfectly competitive industry is a price taker. Price taker: a firm that can alter its output and sales without affecting the market price of its output. The demand curve for a perfectly competitive firm. Even though the demand curve for the entire industry is negatively sloped, each firm in a perfectly competitive market faces a horizontal demand curve because variations in the firm"s output have no significant effect on market price.

Related Questions

1. Which of the following is a characteristic of pure monopoly?

A. close substitute products

B. barriers to entry

C. the absence of market power

D. "price taking"

2. An example of a monopoly would be

A. one of many U.S. wheat farmers

B. one of the few U.S. automakers

C. AT&T cell phone service

D. the local water company

3. In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

A. monopoly

B. oligopoly

C. only perfect competition

D. only monopolistic competition

E. both perfect competition and monopolistic competition

4. Which of the following is the best example of a perfectly competitive market?

A. farming

B. diamonds

C. athletic shoes

D. soft drinks

E. electricity distribution

crimsonalligator541

1. A perfectly elastic demand function

Select one:

a. is characteristic of an individual firm operating in a perfectly competitive market.

b. shows that a consumer is willing to pay any amount for the product.

c. shows that the individual firm can increase sales by lowering the price of output.

d. has a marginal revenue that is always decreasing.

2. Your local farmer has many competitors and exists in a market structure known as perfect competition. This means that price is determined outside of the individual farmer's ability to charge a price higher than the going market for a bushel of wheat, hence the farmer is

Select one:

a. a price maker and can therefore charge different customers different prices.

b. a price taker and cannot affect the market price of wheat.

c. always able to price produce above the competition and earn a larger profit.

d. never able to determine any prices he charges for anything, such as soybeans

3. All of the following are true regarding perfectly competitive price determination EXCEPT

Select one:

a. the individual firm takes the market price as given.

b. the individual firm is known as a market price maker.

c. the individual firm's marginal revenue curve is horizontal at the market price.

d. the market price is determined by the interactions among all buyers (households) and firms.

redhornet79

The terms price maker, price setter, and price searcher are all meant to imply the same thing, which is

Select one:

a. firms operating in a perfectly competitive market have pricing power.

b. it is impossible for any firm to have pricing power.

c. a firm operating in any market but perfect competition that also determines the quantity it produces and the price at which it sells the products.

d. any firm can determine the price at which it sells a product, but no firm can determine the quantity it produces.

e. a price increase will likely drive every customer for the producer of this product to another product.

In monopoly,

Select one:

a. the number of firms is large.

b. there is ease of entry into the market and exit from the market.

c. the product has many good substitutes.

d. economic profits are zero in the long run.

e. None of these choices.

ECO100Y5 Lecture Notes - Lecture 9: Taipei Metro, Sunk Costs, Marginal Revenue

ECO100Y5 Full Course Notes

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