ECO 211 Lecture Notes - Lecture 8: Perfect Competition, Takers, Fixed Cost

39 views2 pages

jesshnxoxgmail-com

9 Sep 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

carmineseal298 and 2 others unlocked

ECO 211 Full Course Notes

Verified Note

1 document

Document Summary

Questions over whether there really exists perfect competition anywhere. Prices different sometimes even within same thing (ex: gas price differs by location such as near airport) Assumptions underlying the competitive model (perfect competition) (competition=perfect competition) Buyers small relative to total market, so are sellers. Free entry & exit zero profit in long run. Easy for firms to get into market, easy to get out. They do(cid:374)"t i(cid:374)flue(cid:374)ce price (cid:894)there are so (cid:373)a(cid:374)y of the(cid:373)(cid:895), ca(cid:374) sell as (cid:373)uch as they (cid:449)a(cid:374)t at (cid:373)arket price. All firms producing exactly same thing, standardized product. Leads to all adopting same technology, looking same. If you do(cid:374)"t use the co(cid:373)petiti(cid:448)e (cid:373)odel, it does(cid:374)"t (cid:449)ork. Firms will find absolute best technology to use (survival of the fittest) Firms that don"t use best technology, profit <0. Must pick best technology & best scale of output, bottom of average cost curve. New technology lower average cost, makes new price at new bottom of curve.

Related Questions

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

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

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 Lecture Notes - Lecture 8: Perfect Competition, Takers, Fixed Cost

ECO 211 Full Course Notes

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO 211 Chapter Notes - Chapter 12: Demand Curve, Marginal Cost, Fixed Cost

ECO 211 Chapter Notes - Chapter 14: Market Power, Demand Curve, Monopolistic Competition

ECO 211 Chapter Notes - Chapter 14: Monopolistic Competition, Substitute Good, Petal

Related Questions