chapter 11

Question 1

perfect competition

Answer 1

many firms sell identical products to many buyers

there are no restrictions to entry into the industry

established firms have no advantages over new ones

sellers and buyers are well informed about prices

Question 2

price takers

Answer 2

is a firm that cannot influence the price of a good or service

Question 3

firms decision

Answer 3

how to produce at minimum cost

what quantity to produce

whether to enter or exit a market

Question 4

short run equilibrium

Answer 4

a firm might make an economic profit, break even, or incur an economic loss

Question 5

long run equilibrium

Answer 5

firms break even because firms can enter or exit the market

Question 6

entry exit

Answer 6

new firms enter an industry in which existing firms make an economic profit, firms exit an industry in which they incur an economic loss

Question 7

new firms

Answer 7

when they do enter the market, the market supply increases, and the market price falls until all firms are making zero economic profit

Question 8

equilibrium and efficiency

Answer 8

resources are used efficiently, so Qd = Qs, so marginal social benefit = marginal social cost, when the two curves intersect is the efficient allocation