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ECO100Y5 Chapter Notes - Chapter 9: Marginal Revenue, Perfect Competition, Marginal Cost

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ceruleangnat759
30 Oct 2017
School
UTM
Department
Economics
Course
ECO100Y5
Professor
Zachary Mahone

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ECO100Y5 Full Course Notes
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Document Summary

Impediments that make it difficult or impossible to for a new firm to enter and compete in a market. Many buyers and sellers all producing the same product. Consumers and producers are aware of quality and prices. Given the market and given the firm"s resources, the firm wants to select a rate of output, levels of inputs, and prices that will provide the highest possible profits for the firm. A firm that takes the price it is given. It cannot do anything to change that price. The demand curve for a perfectly competitive firm is horizontal. Firms should produce at levels where marginal revenue is greater than or equal to marginal costs. Total amount received as firms sell their products. The change in total revenue as a firm sells one more unit of a good or service. Firms should produce at a level where mr=mc. When mr>mc, firms can produce more to make more money.

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Related Questions

A major difference between monopolistic competition and perfect competition is:

a. there are barriers to entry in monopolistic competition. There are no barriers to entry in perfectly competitive markets.

b. monopolistically competitive firms sell differentiated products. Perfectly competitive firms sell identical products.

c. government regulation restricts the ability of monopolistically competitive firms to change their prices. Perfectly competitive firms face no price regulation.

d. the market demand curve in a monopolistically competitive market slopes downward. The market demand curve in a perfectly competitive market is horizontal

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

 

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

 

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

 

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

13. If a monopolistic competitor is producing an output for which marginal revenue is $40 and the marginal cost is $32, to maximize profits the firm should
A. decrease the level of output.
B. keep the level of output constant.
C. continue to make $8 per unit.
D. increase the level of output.

14. A monopolistic competitor will not make an economic profit unless
A. it engages in price discrimination.
B. its marginal revenue is greater than its marginal cost.
C. it faces an inelastic demand curve.
D. its price is greater than its average total cost.

15. The definition of monopolistic competition includes
A. few firms and ease of entry and exit.
B. few firms and barriers to entry and exit.
C. many firms and barriers to entry and exit.
D. many firms and ease of entry and exit.

16. Characteristics of monopolistic competition include all of the following except
A. significant barriers to entry.
B. a relatively large number of sellers and buyers.
C. small market share for each seller.
D. differentiated products.