Chapter 10

Question 1

A market in perfect competition has what four characteristics?

Answer 1

1) There are many sellers
2) Homogenous products
3) Easy Entry/exit
4) buyers and sellers have perfect information

Question 2

What does a perfect competition market not have?

Answer 2

1) product differentiation
2) economics of scale relative to size of market
3) Significant barriers

Question 3

Profit maximization is when what?

Answer 3

MR = MC

Question 4

MC is what?

Answer 4

additional cost per unit

Question 5

MR is?

Answer 5

additional revenue per unit

Question 6

MR =

Answer 6

= Demand curve in perfect Competition

Question 7

Marginal Revenue curve and demand curve are related to each other how?

Answer 7

They are the same

Question 8

MC =

Answer 8

Price is profit maximization

Question 9

If P = AVC this what?

Answer 9

minimal point of AVC AKA shut down price

Question 10

ATC includes both ….

Answer 10

explicit and implicit cost

Question 11

Profit per Unit =

Answer 11

Price - Average Total Cost

Question 12

TC =

Answer 12

TFC + TVC

Question 13

AVC =

Answer 13

TVC / Q

Question 14

standardized product

Answer 14

Products consumers percieve as being identical EX: corn, wheat

Question 15

Differentiated product

Answer 15

Products that consumers percieve as being different of each other EX; cars, clothing and pizza

Question 16

What are the three characteristics of a market structure?

Answer 16

1) the # of firms in market
2) Ease to enter and exit the market
3) Whether product is standardized or differentiated