ECN 104 Chapter Notes - Chapter 12: Marginal Revenue, Perfect Competition, Marginal Cost

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greenhedgehog390

17 Nov 2016

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A price- taking producer is a producer whose actions don"t affect the market price of the good they sell. A price- taking consumer is a consumer whose actions don"t affect the market price of the good they buy. A perfectly competitive market is a market where all the participants are price- takers. A perfectly competitive industry is an industry where all the producers are price takers. The industry must have a lot of producers, and none of them can have a large market share. A producer"s market share is the fraction of an industry"s total output accounted for by that producer"s output. If the consumers see all the producers" products are equal. When all the producers" goods are seen as equals, the good is called standardized product. There is free exit and entry into the industry, so producers can come and go whenever. Total revenue is equal to the market price times the quantity sold.

Related Questions

36.?To stay one step ahead of the forces of competition, a firm can adopt any one of these strategies except

-	?Cost reduction

-	?Product differentiation

-	?Operating where marginal benefits equal marginal costs

?-Develop non-fungible valuable resources

37.Which firm in an industry is likely to have higher profits?

?-Sellers with higher costs than their competitors

?-Sellers with lower costs than their competitors

-	?Sellers with the same costs as their competito

?All of the above

38.?Intense market competition is ________ for producers, since it_______.

-	?Bad; erode consumer surplus

-	?Bad, erode producer profits

-	?Good, increase the price level in the market

?Good; decrease the price level in the market

39.As the number of firms in an oligopoly increases, the magnitude of the

-	output effect increases.

-	output effect decreases.

-	price effect increases.

-	price effect decreases. Thanks!

periwinklehound312

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

Which of the following is not necessarily a characteristic of perfect competition? (Points: 1)

low prices
a large number of buyers and sellers
a homogeneous product
perfect information

2. In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if (Points :1)
it is covering all of its variable cost plus part of its fixed cost

it is covering all of its fixed cost
variable cost is less than the fixed cost
fixed cost is zero

3. The golden rule of profit maximization states that any firm maximizes profit by producing where (Points :
marginal revenue equals marginal cost
demand is unit elastic, and total revenue is the greatest
price equals marginal revenue
price equals marginal cost

4. Which of the characteristics of perfect competition assures that economic profit will be zero in the long run? (Points: 1)
There are easy entry and exit in the market.
Each firm is a price taker.
Each firm has access to perfect information.
Each firm is small relative to the market.

5. A constant-cost industry is distinguished by the fact that(Points: 1)
firms' short-run average total costs are horizontal
firms' short-run marginal cost curves are horizontal
the long-run industry supply curve is perfectly elastic
the short-run industry supply curve is perfectly elastic

6. Commodity products are (Points: 1)
pasteurized
bland
perceived by consumers to be identical
made by one manufacturer

7. In a perfectly competitive industry we are likely to find(Points: 1)
firms producing a wide variety of products
barriers to entry
no profit possible in the short run
firms that do not advertise

8. Perfectly competitive firms are price takers because (Points :1)
all small firms must take the price set by the largest firm in the market
firms take the price that government determines is a "fair" price
each firm is small and goods are perfect substitutes for one another
free entry and exit in the short run creates a constant market price in the long run

9. In perfect competition, if one firm raises its price, (Points :1)
others will follow
that firm will increase its revenues
that firm will lose revenues because other firms will not follow
all consumers will be adversely affected

10. Suppose, at its present rate of output, a perfectly competitive firm's marginal revenue exceeds both its marginal cost and its average variable cost. To maximize profit, the firm should (Points: 1)
lower the price
raise the price
increase output
reduce output

tanpig844

ECN 104 Chapter Notes - Chapter 12: Marginal Revenue, Perfect Competition, Marginal Cost

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