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ECON 10a Chapter Notes - Chapter 14: Sunk Costs, Average Variable Cost, Market Power

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cerisesnake319
3 Nov 2016
School
Brandeis University
Department
Economics
Course
ECON 10a
Professor
Coiner Harry( Michael)

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Document Summary

It is also equal to the price of a good: because a competitive firm is a price taker, its revenue is proportional to the amount of output it produces. The price of the good equals both the firm"s average revenue and its marginal revenue: marginal revenue is the change in total revenue from an additional unit sold. It is also equal to the price of a good. Profit maximization and the competitive firm"s supply curve: a simple example of profit maximization and the marginal cost curve and the firm"s. Supply decision: to maximize profit, a firm chooses a quantity of output such that marginal revenue equals marginal cost. Because marginal revenue for a competitive firm equals the market price, the firm chooses quantity so that price equals marginal cost. Shut down if tr < vc, or p < avc, or if tr/q

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Related Questions

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

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

Provide your perspective on the following questions, and provide specific examples to support your answers. Why is the demand curve horizontal in a perfectly competitive market structure? Explain in terms of the basic market attributes. Given that the firm is a "price taker" based on your logic, is the price also the average revenue? Given that the firm is a "price taker" based on the horizontal demand curve, is the demand curve also the marginal revenue curve? Explain the relationships among demand, price, average revenue, and marginal revenue for this type of market structure.