Ch 10: Perfect Competition

Question 1

What are the characteristics of Pure Competition

Answer 1

Large n.o of sellers
Standardized product
Easy entry and exit
Price takers

Question 2

What is marginal revenue?

Answer 2

MR: Change in total revenue/ change in total output

Question 3

When do producers produce their product?

Answer 3

When MC=MR

Question 4

What is the demand curve for perfect competition?

Answer 4

perfectly elastic-demand is a horizontal line.

Question 5

What kind of efficiency does Perfect competition has?

Answer 5

Productive and allocative efficiency

Question 6

What is constant-curve industry?

Answer 6

When the entry and exit of firms has no effect on the price of the product and thus has no effect on production cost.

Question 7

What is the increasing-cost industry?

Answer 7

When entry of new firms increase the prices thus increasing the production cost.

Question 8

What is the decreasing-cost industry?

Answer 8

When entry of new firms decreases the prices thus decreasing the production cost.

Question 9

In long run, does Perfect competition earn profit?

Answer 9

Perfect competition will only earn normal profit.