ECON 2302 Ch.23
QUIZ: In a perfectly competitive industry in the short run, if the government places a per minus unit tax on output, which of the following will occur...
Marginal costs will increase, and industry supply will decrease.
QUIZ: A firm's long-run position under perfect competition is often said to be efficient because...
P=MR=MC=ATC
QUIZ: In a competitive market, positive economic profits act to...
attract new entrants into the industry.
QUIZ: The demand curve for a perfectly competitive industry is...
downward sloping.
QUIZ: The market demand curve in perfect competition is found by...
horizontally summing the demand curves of the individual consumers.
QUIZ: The change in total revenues resulting from a change in output of one unit is...
marginal revenue.
QUIZ: The demand curve for the perfectly competitive firm is...
perfectly elastic.
QUIZ: Perfect competition is efficient because...
price equals marginal cost.
QUIZ: The role of profits in the model of perfect competition is to...
signal entrepreneurs to enter the industry.
QUIZ: A firm in a perfectly competitive market maximizes profits when it finds...
the quantity at which total revenue minus total cost is the greatest.
QUIZ:In the figure above, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price Upper P 2 is equal to...
Q1+Q3
QUIZ: A perfectly competitive firm is charging $6 and selling 1500 units a month. The firm raises its price by a nickel above the market price. Its profit...
will go down to zero
QUIZ: When the firm is at its shutdown price...
it has losses equal to fixed costs. -break-even line right at bottom of MC -shut down price is below AVC
QUIZ: In long-run equilibrium in perfect competition,
the firm produces at the minimum point of its long-run and short-run average total cost curves.
QUIZ: The perfectly competitive seller's short-run supply curve is...
the part of its marginal cost curve above the average variable cost curve.
QUIZ: In a perfectly competitive market, the average revenue curve of a firm is...
the same as its demand curve.
QUIZ: If markets are perfectly competitive then the production of goods....
will use the least costly combination of resources.
QUIZ: For each example below, identify which statement is not characteristic of a perfectly competitive industry.
***A. One firm produces a large portion of the industry's total output. B. There are many firms in the industry. C. Their products are indistinguishable. D. Firms can easily exit and enter the industry.
LO#1 Discuss the characteristics of perfectly competitive market structure.
-there are large numbers of buyers and sellers: the quantity demanded by one buyer or the quantity supplied by one seller is negligible relative to the market quantity -> no one buyer or seller has any influence on price -the product sold by the firms in the industry is homogeneous: that is, indistinguishable across firms. the product sold by each firm in the industry is a perfect substitute for the product sold by every other firm. buyers are able to choose from a large number of sellers of a product that the buyers regard as being the same. -both buyers and sellers have access to all relevant information: consumers are able to find out about lower prices charged by competing firms. firms are able to find out about cost-saving innovations that can lower production costs and prices, and they are able to learn about profitable opportunities in other industries. -any firm can enter or leave the industry without serious impediments: firms in a competitive industry are not hampered in their ability to get resources or redistribute resources. in pursuit of profit-making opportunities, they reallocate labor and capital to whatever business venture gives them their highest expected rate of return on their investment.
QUIZ: In the figure shown at the right, what is the profit maximizing output and price in the short run?
46, $50
QUIZ: For each example below, identify which statement is not characteristic of a perfectly competitive industry.
A. Many taxicabs compete in a city. B. The city's government requires all taxicabs to provide identical service. C. Taxicabs are virtually identical, and all drivers must wear a designated uniform. ***D. The government also limits the number of taxicab companies that can operate within the city's boundaries.
QUIZ: Which of the following is NOT a characteristic of perfect competition?
A. There are large numbers of buyers and sellers. ***B. The firms in an industry produce goods that are different from each other. C. Both buyers and sellers have equally good information. D. Any firm can easily enter or leave the industry.
QUIZ: For each example below, identify which statement is not characteristic of a perfectly competitive industry.
A. There are many buyers and sellers in the industry. B. Consumers have equal information about the prices of firms' products. ***C. The products differ slightly in quality from firm to firm. D. Many diners compete in a city.
QUIZ: In a perfectly competitive market, if P = ATC in the long run, the firm will...
A. make economic profits. B. leave the industry. C. suffer losses. ***D. None of the above.
QUIZ: Which of the following is closest to a perfectly competitive market?
A. the market for automobiles B. the market for breakfast cereal ***C. the market for corn. D. the pizza market
LO#2 Understand the Demand curve for a perfectly competitive firm vs. the Demand curve for a perfectly competitive industry.
Firm: the going market price as determined by the forces of market supply and market demand; where the market demand curve intersects the market supply curve Industry: demand curve in a perfectly competitive industry is perfectly elastic at the going market price; with a perfectly elastic demand curve, any increase in price leads to zero quantity demanded
QUIZ: Refer to the figure at right. If the market price is equal to A, which statement can be made about profits?
Profits are negative and equal to BCEA.
QUIZ: The perfectly competitive firm's demand curve has...
a slope of zero.
QUIZ: he decision making process for the perfectly competitive firm boils down to...
deciding how much to produce.
QUIZ: At the short-run break-even point, the firm is...
earning zero economic profit.
QUIZ: In the long run when a perfectly competitive firm experiences negative economic profits,
firms exit the industry, the market supply curve shifts leftward, and the market price rises.