ECON 103 Chapter Notes - Chapter 9: Fixed Cost, Production Function, Takers

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scarletcicada217

12 May 2016

School

Simon Fraser University

Department

Economics

Course

ECON 103

Professor

Vasyl Golovetskyy

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Document Summary

A competitive market is characterized by several features. The price for the product is determined in the market for this commodity, and the firm simply takes this price as given and assumes it can sell all it wants at that price. The elasticity of demand for the price taking firm is infinity. When a firm considers the market price as its demand curve, then the demand curve is also equal to the marginal and average revenue for the firm. For a price taking firm the demand curve is the price, the marginal revenue, and the average revenue. All competitive firms ignore their rivals, and make output decisions based only on prices. There is no strategic behaviour on the part of firms: since every firm has no impact on price, they don"t waste time thinking. Average revenue: total revenue divided by total output.

Related Questions

A. A competitive firm

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

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

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

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
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

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

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

the marginal revenue curve.
perfectly inelastic.
always equal to marginal cost.
the same as the market demand curve

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

monopolistic
oligopolistic
monopolistically competitive
perfectly competitive

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

total revenue will fall if the price increases.
total revenue will be unchanged if the price increases.
total revenue will rise if the price increases.
the total supply will increase by an equal amount if demand increases.
the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

monopoly.
perfect competition.
theories of consumer behavior.
imperfect competition.
the extreme cases on the market structure continuum

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

perfect competition
monopolistic competition
oligopoly
monopoly

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

economic profits are zero.
TR > TC.
TR < TC.
P = AVC.
normal profits are zero.

brownlouse308

Firm z, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of $16 per unit. Its cost function is C = 50 + 4Q +2Q^2. The associated marginal cost is MC = 4 +4Q, and the point of a minimum average cost is Qmin = 5.

a. Determine the firm's profit-maximizing level of output. Compute its profit.

b. The industry demand curve is Q = 200 -5P. What is the total market demand at the current $16 price? If all firms in the industry have cost structures identical to that of firm Z, how many firms will supply the market?

c. The outcomes in parts a and b cannot persist in the long run. Explain why. Find the market's price, total output, number of firms, and output per firm in the long run.

d. Comparing the short-run and long-run results explain the changes in the price and in the number of firms.

viridianhippopotamus258

4 Firm Z, operating in a perfectly competitive market, can sell as much or as little as it wants of a good at a price of $16 per unit. Its cost function is C = 50 + 4Q + 2Q^2 . The point of minimum average cost is Qmin = 5 (verify this). a) Determine the firmâs profit-maximizing level of output. Compute its profit. b) The industry demand curve is Q = 200 â 5P. What is the total market demand at the current $16 price? If all firms in the industry have cost structures identical to that of firm Z, how many firms will supply the market? c) The outcomes in part (a) and (b) cannot persist in the long run. Explain why. Find the marketâs price, total output, number of firms, and output per firm in the long run. d) Comparing the short-run and long-run results, explain the changes in the price and in the number of firms

ECON 103 Chapter Notes - Chapter 9: Fixed Cost, Production Function, Takers

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