9.1: Perfect Competition

Question 1

Perfect competition is a market structure in which…

Answer 1

The individual firm has virtually no impact on market price, because it is assumed to be a very small seller among a very large number of firms selling essentially identical products.

Question 2

Monopolistic competition is a highly competitive form…

Answer 2

Of imperfect competition; the competitive characteristic is a notably large number of firms, while the monopoly aspect is the result of product differentiation.

Question 3

Five factors determine market structure:

Answer 3

1. The number and relative size of firms supplying the product;
2. The degree of product differentiation;
3. The power of the seller over pricing decisions;
4. The relative strength of the barriers to market entry and exit;
5. The degree of non-price competition.

Question 4

Horizontal demand schedule - …

Vertical demand schedule - …

Answer 4

Implies that at a given price, the response in the quantity demanded is infinite.

Implies that some fixed quantity is demanded, regardless of price.

Question 5

Consumer surplus is the difference between…

Answer 5

The value that a consumer places on units purchased and the amount of money that was required to pay for them.

Question 6

Marginal value curve is a curve describing…

Answer 6

The highest price consumers are willing to pay for each additional unit of a good.