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What would happen to a perfectly competitive form if they set the price above the market price? What would happen to a perfectly competitive firm if they set the price below the market price? What does this indicate about the level of market power that a competitive firm has?

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Kritika Krishnakumar
Kritika KrishnakumarLv10
28 Sep 2019
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Related questions

1. If the ATC curve is above the demand curve in a perfectly competitive firm, the firm will have a:
- profit
- loss
- break-even
- price floor
 
2. If the ATC curve is below the demand curve in a perfectly competitive firm, the firm will have a:
- profit
- loss
- break-even
- price ceiling
 
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.
 

1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

 

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm

a. Your firm is producing a good in a perfectly competitive market. If you know that when you produce 25 units per day, your total costs are $100, and when you produce 26 units, your total costs are $110. The market price for the product is $15. What should you do to maximize profits?

b. Suppose Robin's Clock Works produces in a perfectly competitive market. Suppose the ATC of clocks is $95, the AVC is $90 and the price of clocks is $85. The firm is currently producing at the level of output where MC equals price. What should the firm do to maximize its profits?

c. Suppose Peter's Clock Works produces in a perfectly competitive market. Suppose the ATC of clocks is $85, the AVC is $80 and the price of clocks is $82.50. The firm is currently producing at the level of output where MC equals price. What should the firm do to maximize its profits?

d. Austin sells golf balls in a perfectly competitive market. At its current level of golf ball production, his marginal costs equal to $1, and AVC is rising. If the market price of golf balls is $2, what should Austin do to maximize profits?

e. Austin sells golf balls in a perfectly competitive market. At its current level of golf ball production, his marginal costs equal to $2, and AVC is rising. If the market price of golf balls is $1, what should Austin do to maximize profits?

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