Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

A2 Microeconomics Wilson > 73 Perfect Competition 08-01-25 > Flashcards

73 Perfect Competition 08-01-25 Flashcards

1
Q

What is Perfect Competition in Reality?

A

> Theoretic Concept
Characteristics Cannot Occur Simultaneously

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Give 4 Characteristics of Perfect Competition…

A

> Many Buyers/Sellers
Perfect Market Information
Ability to Buy/Sell as Much as Possible at Ruling Market Price
Inability to Influence Ruling Market Price
No Barriers to Entry/Exit
Uniform Product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Give The Diagram For Short-Run Profit Maximisation in Perfect Competition…

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Where is Ruling Market Price (Short-Run Perfect Competition)?

A

> P1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What Determines Ruling Market Price (Short-Run Perfect Competition)?

A

> Intersection of Demand & Supply

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Where is Profit Maximisation (Short-Run Perfect Competition)?

A

> MC = MR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is Total Sales Revenue (Short-Run Perfect Competition)?

A

> Q1 x P1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is Total Cost (Short-Run Perfect Competition)?

A

> Q1 x C1

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is Abnormal Profit (Short-Run Perfect Competition)?

A

> Q1 x (P1 - C1)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Give The Diagram For Long-Run profit Maximisation in Perfect Competition…

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

In The Long Run Firms…

A

> Enter/Leave Markets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What Do Abnormal Profits Signal?

A

> Abnormal Profit Ability
Incentive For Market Entry

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What Happens When Firms Enter Market (Long-Run Perfect Competition)?

A

> Supply Rises (S1 to S2)
Price Falls (P1 to P2)
Below ATC Curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What Happens After Firms Enter Market (Long-Run Perfect Competition)?

A

> Losses Made (Subnormal Profits)
Incentive For Market Exit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What Happens After Firms Exit Market (Long-Run Perfect Competition)?

A

> Supply Decreases (S2 to S3)
Market Price Rises & Stabilises (P2 to P3)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What Happens To Surviving Firms in Long-Run (Long-Run Perfect Competition)?

A

> Make Normal Profits (At Q3)

17
Q

Give The Diagram For Perfectly Competitive Firm Making Normal Profits in Long-Run…

A
18
Q

Where is Total Revenue & Cost (Perfectly Competitive Firm Making Normal Profit in Long-Run)?

A

> Q3 x P3

19
Q

Where Does Productive Efficiency Occur?

A

> Lowest Point on ATC Curve (AC Minimised)

20
Q

What is Productive Efficiency?

A

> Impossible to Increase Production Without Producing Less of Another

21
Q

What is Allocative Efficiency?

A

> Impossible to Improve Overall Economic Welfare
By Reallocating Resources
Between Different Markets in Economy
PRICE MUST EQUAL MC IN EVERY MARKET

22
Q

What 3 Things Happen in Long-Run In Perfectly Competitive Markets?

A

> Firms Earn Normal Profit
Consumer Pays MC
Firms Productively & Allocatively Efficient

23
Q

When Does Productive & Allocative Efficiency Occur Simultaneously?

A

> All Firms in Market Benefit From EOS (Unlikely as Most Firms Operate Below MES)
All Markets Perfectly Competitive
No Positive/Negative Externalities

24
Q

Is it Possible For Productive & Allocative Efficiency to Occur Simultaneosly?

A

> IMPOSSIBLE

25
Q

In Long-Run, Perfect Competition Creates Optimal Allocation of Resources…

A

> Reflecting Consumer Preferences

26
Q

Where Does Allocative Efficiency Occur?

A

> P = MC

27
Q

Where Does Allocative Inefficiency Occur?

A

> P > MC
P < MC

28
Q

What Does Price Measure?

A

> Opportunity Cost in Consumption

29
Q

What Does MC Measure?

A

> Opportunity Cost in Production

30
Q

What is Discouraged in P > MC Markets?

A

> Consumption

31
Q

What Happens Due to Discouraged Consumption in P > MC Markets?

A

> Good Under-Produced
Good Under-Consumed

32
Q

What is Encouraged in P < MC Markets?

A

> Consumption

33
Q

What Happens Due to Encouraged Consumption in P < MC Markets?

A

> Good Over-Produced
Good Over-Consumed

34
Q

How Can Allocative Inefficiency be Reduced?

A

> Resources Taken From P < MC Markets
To P > MC Markets

35
Q

How Does Total Consumer Welfare Rise in Long-Run in Perfectly Competitive Markets?

A

> Prices Fall in P < MC Markets
Prices Rise in P > MC Markets

A2 Microeconomics Wilson (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions