Log in
HomeTextbook Notes300,000CA170,000

ECON 1000 Chapter Notes - Chapter 12: Perfect Competition, Marginal Revenue, Demand Curve

88 views3 pages
tanguinea-pig300
24 Nov 2017
School
York University
Department
Economics
Course
ECON 1000
Professor
Gordana Colby

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

castroariane563 and 39059 others unlocked
ECON 1000 Full Course Notes
10
ECON 1000 Full Course Notes
Verified Note
10 documents

Document Summary

In perfect competition, ar = mr = p. In the short run, firm decides what quantity to produce or to shut down: economic profit max at quantity where mr = mc: If mr > mc, firm increases q to increase economic profit. If mr < mc, firm decreases q to increase economic profit: economic loss = tfc + (avc p) x q, but if firm shuts down: economic loss=tfc, for firm incurring economic loss: If p > avc, firm maxes profit by continuing to produce. If p < avc, firm will temporarily shut down: shutdown point at min avc, perfe(cid:272)tly (cid:272)o(cid:373)petitive fir(cid:373)"s supply (cid:272)urve is its mc curve above min avc. Output, price, and profit in the short run. Short-run industry supply curve is horizontal sum of individual firm supply curves. In the short run, the number of firms and their plant size are fixed. Output, price and profit in the long run.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECON 1000 Chapter Notes - Chapter 12: Technological Change, Sunk Costs, Market Power
limeeel905
ECON 1000 Lecture Notes - Lecture 12: Market Power, Marginal Revenue, Perfect Competition
carmineraccoon724
ECON 1000
Final Exam
Study Guide
ECON 1000 Study Guide - Final Guide: Market Power, Competitive Equilibrium, Marginal Revenue
jadeantelope897

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

In a perfectly competitive market, assume every firm faces the same short run total cost curve: TC= 2q^2 + 10q + 200. The market demand curve is :Qd = 800-8P. Given perfect competition, if this industry is in long run equillibrium:

1) Find the level of output produced by each firm

2) Find the market price of the output.

3) Find the total industry output adn the number of firms in the market.

4) How much economic profit does each firm in this market make?

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.