ECO101H1 Chapter Notes - Chapter 12: Perfect Competition, Marginal Revenue, Marginal Cost

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Chapter 12: perfect competition and the supply curve. A price-talking producer is a producer whose actions have no effect on the market price of the good or service it sells. A price-taking consumer is a consumer whose actions have no effect on the market price of the good or service he or she buys. A perfectly competitive market is a market in which all participants are price-takers. As a general rule, consumers are price-takers; it is, however, quite common for producers to have price-setting abilities: an industry in which all producers are price-takers is called a perfectly competitive industry. Necessary conditions for perfect competition: for an industry to be perfectly competitive, it must contain many producers, none of whom have a large market share. A producer"s market share is the fraction of the total industry output accounted for by that producer"s output: the industry output is a standardized product.

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

Choose a market for a good in your area that seems to be a perfectly competitive market. Perfect competition is useful in analyzing real-world markets, even though there are very few, if any, that match the characteristics of the perfect competition model. Answer the following questions to describe the market, and describe how competitive the market you have chosen is:

What good or service is provided in this market?

Who are the buyers and who are the sellers in the market?

Are there many sellers in the market?

Are there very many substitutes for the good or service?

If the store where you usually buy this item raised its prices, would you go to another store or switch products? Explain.

Do you think that this a competitive market? Explain.

erinlouse173

A. A competitive firm

can consider only its location in setting the price.
must base its competitive price on product differentiation.
has the ability to set its own price.
must accept the price determined by the intersection of the market supply and demand curves.
has no supply curve.

B. If a firm is making an economic profit, then

the factors of production are being paid their opportunity costs.
there will be no change in the number of firms if the industry is perfectly competitive.
the factors of production are being paid less than their opportunity costs.
the factors of production are being paid more than their opportunity costs.
the firm will exit the industry

C. Along a downward-sloping monopoly demand curve,

marginal revenue is greater than price.
the elasticity of demand is constant.
marginal revenue decreases when the price decreases.
marginal revenue is equal to zero when the price is equal to zero

D. If, in the short run, a perfectly competitive firm is producing at a point where the total cost is greater than total revenue, then the firm should

shut down because economic profits are negative.
continue to produce as long as P > AVC.
continue to produce because accounting profits are positive.
set a higher price for its output.
set a lower price for its output

E. For a perfectly competitive firm, the demand curve is

the marginal revenue curve.
perfectly inelastic.
always equal to marginal cost.
the same as the market demand curve

F. A firm in a(n) industry will have the most elastic demand curve

monopolistic
oligopolistic
monopolistically competitive
perfectly competitive

G. If the demand curve of a monopolist is in the inelastic range, then

total revenue will fall if the price increases.
total revenue will be unchanged if the price increases.
total revenue will rise if the price increases.
the total supply will increase by an equal amount if demand increases.
the price will be unchanged if total revenue increases

H. Monopolistic competition and oligopoly are examples of

monopoly.
perfect competition.
theories of consumer behavior.
imperfect competition.
the extreme cases on the market structure continuum

I. Under which market structure do firms face the flattest (most elastic) demand curve?

perfect competition
monopolistic competition
oligopoly
monopoly

J. At the point of long-run equilibrium for a perfectly competitive firm,

economic profits are zero.
TR > TC.
TR < TC.
P = AVC.
normal profits are zero.

brownlouse308

ECO101H1 Chapter Notes - Chapter 12: Perfect Competition, Marginal Revenue, Marginal Cost

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