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Economics 10a Chapter Notes - Chapter 16: Economic Surplus, Perfect Competition, Marginal Cost

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School
Harvard University
Department
Economics
Course
Economics 10a
Professor
Gregory Mankiw

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Document Summary

Each firm faces a downward sloping demand curve because the products are slightly different. Mr=mc, using the demand curve to find the price at which it can sell that quantity: long run, as in monopoly, price>mc profit maximization requires mr=mc & downward sloping demand curve makes mr

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Related Questions

What are the three conditions for a market to be perfectly competitive? For a market to be perfectly competitive, there must be:

A. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.

B. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market

C. many buyers and a few sellers, with all firms selling identical products, and no barriers to new firms entering the market.

D. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.

E. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market.

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

 

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

 

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

 

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

36) Which one of the following statements describes a market that is monopolistically competitive? A) The presence of significant barriers to entry. B) The products produced by the firms are identical. C) Many firms compete by making similar but slightly different products. D) There is a small number of large firms. E) The product produced by one firm has no close substitutes.