Chapter 13: Market structure: perfect competition

Question 1

Define market structure

Answer 1

The market environment within which firms operate

Question 2

Define barrier to entry

Answer 2

A characteristic of a market that prevents new firms from readily joining the market

Question 3

Define perfect competition

Answer 3

A form of market structure that produces allocative and productive efficiency in the long run equilibrium

Question 4

Define price taker

Answer 4

A firm that must accept whatever the price is set in the market as a whole

Question 5

Define short run supply curve (SRS)

Answer 5

For a firm operating under perfect competition, the curve given by its short run marginal cost curve above the price at which MC = SAVC - for the industry, the horizontal sum of supply curves of the individual firms

Question 6

Define industry long-run supply curve (LRS)

Answer 6

Under perfect competition the curve that for the typical firm in the industry is horizontal at the minimum point of the long-run average cost curve