ECON 1116 Chapter Notes - Chapter 14: Average Variable Cost, Marginal Revenue, Market Price

35 views4 pages

ochredeer739

24 Aug 2016

School

Northeastern University

Department

Economics

Course

ECON 1116

Professor

Niam Nehan

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

Document Summary

2: optimal outcome, characteristics, many firms and many buyers a. i. None of the firms are big/strong enough to exercise market power a. ii. Does not have power to affect the market price a. iii. Firms are all small: homogeneous products b. i. But the flight to get from one place to another is the same b. ii. 3. Similar avc, mc, and atc curves: price takers c. i. Price cannot be higher or lower than the price c. iii. If firms want to lower or increase their price, they cannot. The action of any single buyer or seller has no effect on the market price. If one firm decides to charge more people can easily switch to other firms c. v. Advantages c. v. 1. c. v. 2. c. v. 3. individually your actions are insignificant in affecting the market price. Firm decides to decrease their supply market price does not change. Firms can sell more or less without fearing that the customer"s demand will change c. v. 4. c. v. 5. well.

Related Questions

11-Short-run costs which increase and decrease as an output increases or decreases are called: a.Variable costs b.Secondary costs c.Derived costs d.Partial costs e.Potential costs 12.The addition to total cost resulting from the addition of the last unit of output is called the: a.Total variable cost b.Average variable cost c.Fixed cost d.Implicit cost e.Marginal cost 13.The fact that a single large factory may be more efficient than several smaller factories of the same total capacity is a reflection of: a.Increasing returns of scale. b.The law of diminishing marginal returns c.Comparative advantage d.The crowding-out effect e.Reproduction cost of assets 14.A possible reason for the existence of increasing return to scale is: a.The inability of a firm to increase all inputs proportionally b.Problems of coordination and control c.Higher input prices d.Larger fixed costs with a larger plant size. e.Greater specialization 15.The model of perfect competition is useful because: a.Most firms in the real world are perfectly competitive b.Perfectly competitive firms exert significant perfect competition. c.Government regulation is designed to eliminate perfect competition. d.It is a model of an ideal world which sheds much light on a market structureâs effects on resources allocation e.Advertising agencies are heavily dependent on the advertising dollars of perfectly competitive firms 16.A market consisting of many firms producing homogeneous products, having complete knowledge of relevant information, no power over the productâs market price, and low barriers to entry is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above markets 17.A market consisting of many firms, low barriers to entry, some control over price, but considerable non-price competition is characteristic of: a.Perfect competition b.Monopoly c.Monopolistic competition d.Oligopoly e.None of the above. 18.A market consisting of a few firms producing similar products with significant barriers to entry is characteristic of: a.Perfect completion. b.Monopoly c.Monopolistic competition. d.Oligopoly e.None of the above

harlequinwhale491

1. Characteristics of competitive markets

The model of competitive markets relies on these three core assumptions:

1.	There must be many buyers and sellers a few players can't dominate the market.
2.	Firms must produce identical products buyers must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing free entry into and exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behavior, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Scenario	Competitive?
The government has granted the U.S. Postal Service the exclusive right to deliver mail.	________________
Several stores in the mall sell hooded sweatshirts. Each store's sweatshirts reflect the style of that particular store. Additionally, some makers use higher-quality cotton than others, which is reflected in the apparel's prices.
Two taxi companies serve most of the market in a big city. Consumers don't care about which taxi company they take if they decide it's worth taking a taxi, they flag down the nearest one.	_________________
There are dozens of pasta producers that sell pasta to hundreds of Italian restaurants nationwide. The restaurant owners buy from the cheapest pasta producer available to

copperhamster111

1. Characteristics of competitive markets

The model of competitive markets relies on these three core assumptions:

1.	There must be many buyers and sellers a few players can't dominate the market.
2.	Firms must produce an identical product buyer must regard all sellers' products as equivalent.
3.	Firms and resources must be fully mobile, allowing for free entry into and exit from the industry.

The first two conditions imply that all consumers and firms are price takers. While the third is not necessary for price-taking behaviour, assume for this problem that a market cannot maintain competition in the long run without free entry.

Identify whether or not each of the following scenarios describes a competitive market, along with the correct explanation of why or why not.

Is the scenario	Competitive?
Dozens of companies produce plain white socks. Consumers regard plain white socks as identical and don't care who manufactures their socks.
In a major metropolitan area, one chain of coffee shops has gained a large market share because customers feel its coffee tastes better than that of its competitors.
Scholastik Inc. owns the U.S. copyright to a popular book series. It is the only company with the legal right to publish books in the series in the United States.
In a small town, there are two providers of broadband Internet access: a cable company and the phone company. The Internet access offered by both providers is of the same speed.

amberfly263

ECON 1116 Chapter Notes - Chapter 14: Average Variable Cost, Marginal Revenue, Market Price

Document Summary

Get access

Related Documents

ECON 1116 Study Guide - Midterm Guide: Repeated Game, Externality, Nash Equilibrium

ECON 1116 Chapter Notes - Chapter 16: Economic Surplus, Externality, Monopolistic Competition

ECON 1116 Chapter Notes - Chapter 16: Invisible Hand, Externality, Economic Surplus

Related Questions