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ECON 1000 Chapter Notes - Chapter 12: Perfect Competition, Average Variable Cost, Market Power

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plummoose614
9 Feb 2018
School
York University
Department
Economics
Course
ECON 1000
Professor
Steven Edwards

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Document Summary

A firm"s demand is perfectly elastic (horizontal at market price) Marginal revenue = price elasticity of demand along a straight-line demand curve decreases as we move down along the curve. For perfect competition to arise, it is necessary that market demand be large relative to the minimum efficient scale of a single firm. Price and quantity price and quantity at which a firm is indifferent between producing and shutting down. At this point, the price is equal to minimum average variable cost. At this price, the firm"s loss is equal to its total fixed cost. The firm can avoid losses that are greater than fixed costs by. If the price falls below the shutdown point, the firm"s loss is greater than its fixed costs. The firm can avoid losses that are greater than fixed costs by shutting down and not producing.

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Related Questions

In a perfectly competitive market, the firm is a price taker because _____.
 
A.

the price is dictated by the largest firm in the market, and if a given firm lowers its price other firms will conspire against it

B.

the firms in perfect competition are interdependent and if one firm charges a lower price, other firms will also lower their prices and all firms will incur an economic loss

C.

the price in the market is the price that maximizes each firm's producer surplus

D.

each firm makes a slightly different product

E.

it produces only a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms

A firm in perfect competition is a price taker because​ _______.

A) charging a lower price than the market price is considered uncompetitive.

B) the market price is always the profit-maximizing price.

C) it is easier to take the price as given rather than calculate the profit-maximizing price.

d) it produces a tiny proportion of the total output of a particular good and buyers are well informed about the prices of other firms.

15) Which one of the following does not occur in perfect competition? A) Sellers and buyers are well informed about prices. B) No single firm can exert a significant influence on the market price of the good. C) Established firms have no advantage over new ones. D) There are significant restrictions on entry into the market. E) There are many buyers.