ECON 1 Lecture Notes - Lecture 14: Takers, Marginal Revenue, Average Variable Cost

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magentamuskrat366

3 Dec 2020

School

Irvine Valley College

Department

Economics

Course

ECON 1

Professor

Collinson

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Document Summary

Pure competition- a very large number of firms producing a standardized product e. g. cotton. New firms can enter or exit the market quickly. A very large number of independently acting sellers often offering products in large national or international markets. Price takers- do not exert control over product price. Each firm produces a small fraction of total output. Perfectly elastic- the firm cannot obtain a higher price by restricting output or increase sales by lowering sales price. Average revenue- revenue per unit- received by the seller is the same as the sales price. Total revenue- for each sales level is found by multiplying price by the quantity the firm can sell. Marginal revenue is the change in total revenue that results firm selling one more unit of output. Profit maximization in the short run: total revenue-revenue- Profit and loss are adjusted in the output not the price.

Related Questions

1. A firm that is a pure competitor has P > ATC and P > MC on the output (Q) it is presently producing and selling. Is this firm maximizing its profits? If not, which direction should it change its output if it wants to maximize its total profit?

2. Is a pure competitor in short-run or long-run equilibrium if it has P=MC=ATC? Explain.

3. There is free entry in the model of pure competition. Assuming that P > ATC for a vast number of firms producing a standardized product for a given market, what will happen to market supply as the consequence? What will happen to the market price (P) of the product these firms are producing?

4. Firms in the pure competition have horizontal demand functions. (The market determines product price, so firms in this competitive market are price takers.) Do firms in this model have to lower prices if they want to sell more output? Why or why not?

copperporcupine291

Match the following.

constant-cost industry	A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry	The demand facing a price-taking firm.
long-run equilibrium	A firm produces zero output but must still pay its fixed costs.
marginal revenue product	Price below which a firm shuts down in the short run.
perfect competition	All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand	Industry in which input prices rise as all firms in the industry expand output.
shut down	Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price	The additional revenue earned by hiring one more unit of a variable input.

viridianhare336

1. A monopoly market structure is characterized by

a. large number of firms, standardized products, easy entry and exit.

b. large number of firms, differentiated products, easy entry and exit.

C. small number of firms, standardized or differentiated products, difficult entry.

d. one firm, a unique product without close substitutes, and impossible entry.

e. one firm, differentiated product, impossible entry.

2. Which of the following is not a characteristic of monopolistic competition?

a. Differentiated products

b. A downward-sloping demand curve for individual firms

c. Firms that are price makers

d. Impeded entry into the industry

e. A large number of firms

3. One factor that distinguishes oligopoly from other market structures is

a. the ease of entry into the market.

b. the interdependence of firms.

c. the slope of the demand curve.

d. the degree of product differentiation.

e. the amount of advertising expenditures.

lavenderbat941

ECON 1 Lecture Notes - Lecture 14: Takers, Marginal Revenue, Average Variable Cost

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