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ECON 10a Lecture Notes - Lecture 14: Marginal Revenue, Perfect Competition

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School
Brandeis University
Department
Economics
Course
ECON 10a
Professor
Coiner Harry( Michael)

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Document Summary

Market structure: perfect competition in firms: 4 conditions to perfect competition, lots of firms, each one small, firms produce an identical product, not merely just similar, perfect information at all levels. In perfect competition, demand curve = marginal revenue: however, outside of perfect competition demand curve and marginal. Revenue represent different curves: short-run profit maximization, easy case. Profit = rev - tc: however, in the short-run. Profit = rev - vc - fc: if q = 0. Profit hill = profit as it relates to quantity. Firm attempts to find profit by finding the quantity where marginal revenue intersects marginal costs: hard case. Past the first point of marginal revenue, profit goes up but perhaps does not meet the initial costs: 2 candidates for profit maximizing quantity, quantity 0 (shutdown, q*, where mr intersects rising mc. Shutdown if price < avc at q*: 2 stage rule for profit-maximization. Step 1: find q*, the q where mr intersects rising mc curve.

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Related Questions

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

  • all of the time
  • some of the time
  • on rare occasions
  • none of the time

2. Economics Profit is:

  • the same as accounting profit
  • sales minus explicit costs and implicit costs
  • sales minus variable costs and fixed costs
  • opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

  • monopoly
  • oligopoly
  • perfect competition
  • monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

  • identical products
  • perfect mobility
  • perfect knowledge
  • price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

  • true
  • false

A. A competitive firm

  1. can consider only its location in setting the price.
  2. must base its competitive price on product differentiation.
  3. has the ability to set its own price.
  4. must accept the price determined by the intersection of the market supply and demand curves.
  5. has no supply curve.

B. If a firm is making an economic profit, then

  1. the factors of production are being paid their opportunity costs.
  2. there will be no change in the number of firms if the industry is perfectly competitive.
  3. the factors of production are being paid less than their opportunity costs.
  4. the factors of production are being paid more than their opportunity costs.
  5. the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

  1. marginal revenue is greater than price.
  2. the elasticity of demand is constant.
  3. marginal revenue decreases when the price decreases.
  4. marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

  1. shut down because economic profits are negative.
  2. continue to produce as long as P > AVC.
  3. continue to produce because accounting profits are positive.
  4. set a higher price for its output.
  5. set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

  1. the marginal revenue curve.
  2. perfectly inelastic.
  3. always equal to marginal cost.
  4. the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

  1. monopolistic
  2. oligopolistic
  3. monopolistically competitive
  4. perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

  1. total revenue will fall if the price increases.
  2. total revenue will be unchanged if the price increases.
  3. total revenue will rise if the price increases.
  4. the total supply will increase by an equal amount if demand increases.
  5. the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

  1. monopoly.
  2. perfect competition.
  3. theories of consumer behavior.
  4. imperfect competition.
  5. the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

  1. perfect competition
  2. monopolistic competition
  3. oligopoly
  4. monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

  1. economic profits are zero.
  2. TR > TC.
  3. TR < TC.
  4. P = AVC.
  5. normal profits are zero.

Homework help and study guide help, all multiple choice

A monopolist:

A) can sell as much as it wants at the chosen price because it is the only seller.

B) can increase the price only if it is willing to decrease the quantity sold.

C) can increase the price and the quantity sold at the same time.

D) is not restricted by the law of demand.

A monopolistically competitive firm:

A) produces where marginal revenue equals marginal cost and charges the price consumers are willing to pay as given by the demand curve.

B) produces where marginal cost equals average total cost and charges the price consumers are willing to pay as given by the demand curve.

C) chooses price and quantity based on where the marginal cost curve meets the demand curve.

D) chooses price and quantity based on where the average total cost curve meets the demand curve.

21) Oligopoly is A) like a monopoly because there are barriers to entry. B) like perfect competition because oligopoly firms all sell homogeneous goods. C) like monopolistic competition because oligopoly firms all sell differentiated goods D) like perfect competition because there are many firms in the industry
ECON 1102 (Microeconomics) Test 4 (043015)


In ________ market structure, a firm's output depends ________.

A) an oligopoly; only on its own marginal revenue and marginal cost curves

B) a monopolistically competitive; in part on its competitors' price and quantity decisions

C) an oligopoly; in part on its competitors' price and quantity decisions

D) a monopolistically competitive; only on its marginal revenue curve