Learnsmart 13

Free entry into a market in the short run can help drive

cost cutting. quality improvements. innovation.

A perfectly competitive market can be defined as,

having price-taking buyers and sellers trading standardized goods.

When goods are standardized, buyers have no reason to prefer those sold by one producer over those sold by another,

provided that they are the same price.

The only choice that a perfectly competitive firm can make to affect its profits, is to decide the

quantity to produce.

When goods are standardized, they are ---.

similar

Many natural resources can be considered _____ goods.

standardized

Suppose Meg's Marine is producing 14 boats and is considering whether or not to increase its output to 15 boats. At an output of 14 boats, the marginal revenue is $1,000, and the marginal cost is $1200. In this case, they should

not increase production because marginal profit decreases.

In the short run, even if a perfectly competitive firm produces nothing,

they must pay the fixed costs which do not change when quantity falls to zero.

A perfectly competitive firm can only decide the quantity of output to produce because they are

too small to influence the market price.

Which of the following are examples of standardized goods?

Oil Copper Gold

Which of the following is NOT one of the four defining characteristics of a competitive market?

There are only a few sellers.

In real life, goods are

differentiated by quality, brand, or other characteristics.

The ability to noticeably affect market prices implies

market power.

A perfectly competitive firm will make profits as long as the

market price is above the firm's average total cost.

When a market has free entry and exit, there will likely be

more firms competing.

Having price-taking buyers and sellers trading standardized goods is sufficient to define a --- competitive market.

perfectly

Buyers and sellers have all of the information they need to make the best decision possible in a

perfectly competitive market.

Market --- is the ability to noticeably affect market prices.

power

The first essential characteristic of a perfectly competitive market is this: buyers and sellers have so much competition, they have no ability at all to set their own ---.

price

In a perfectly competitive market,

the market price is the same thing as the firm's marginal revenue and average revenue.

Economists use the idea of perfectly competitive markets to refer to

an idealized model of markets.

In perfectly competitive markets,

buyers and sellers face very low transaction costs.

The four defining characteristics of a competitive market are that

buyers and sellers have full information. goods are standardized. buyers and sellers can't bargain over prices. there are no transaction costs.

When buyers and sellers know exactly what is being traded,

buyers and sellers have the same information. there are no information asymmetries.

In perfectly competitive markets,

buyers face low (or zero) transaction costs. sellers face low (or zero) transaction costs

When goods are not standardized, producers will be able to

charge different prices.

Most sellers and buyers face some degree of ---.

competition

In a perfectly competitive market, firms are able to

easily enter and exit the market.

For any firm selling one product, average revenue is equal to the

price of the good.