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APEC 1101 > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

What is market structure based off of?

A

number of firms, standard or differentiated product, ease of entry

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2
Q

Formula for total revenue

A

TR= P x Q

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3
Q

Formula for average revenue

A

AR= TR/Q= P

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4
Q

Formula for marginal revenue

A

MR= change in TR/ change in Q= P

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5
Q

What is marginal revenue?

A

additional revenue that firm receives by producing one more unit of output

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6
Q

Formula for economic profit

A

= (P- change in TC) Q

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7
Q

What does the demand curve look like for a purely competitive seller?

A

horizontal line, can sell as much output as it wants with current market price (D=P=MR=AR)

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8
Q

Definition of short -run profit maximization

A

a price-taking firm maximizes its economic profit by adjusting its output quantity (only through change in amount of variable inputs used)

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9
Q

What should a firm compare to max out profit?

A

marginal revenue and marginal cost

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10
Q

Where is the break even point for a perfectly competitive firm on the short-run supply curve?

A

where ATC and MC intersect

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11
Q

where is the shut down point for a perfectly competitive firm on the short-run supply curve?

A

where AVC and MC intersect

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12
Q

Basic assumptions for profit maximization in the long-run of a perfectly competitive firm(3)

A

1) entry and exit only
2) identical costs for all firms
3) constant-cost industry (entry and exit of firms do not effect resource prices)

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13
Q

Basic results for profit maximization in the long-run of a perfectly competitive firm (3)

A

1) entry eliminates economic profit: firms enter, supply increases, and price falls
2) exit eliminates economic losses: firms exits, supply decreases, price rises
3) after all long-run adjustments are completed in a purely competitive industry, product price with be EQUAL TO the firm’s ATC and production will occur at the firm’s minimum ATC curve.

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14
Q

Long-run supply curve for constant-cost industries

A

entry and exit do not affect resource prices and thus, do not affect long-run ATC of individual firms

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15
Q

Long-run supply curve for increasing-cost industries

A

entry (exit) increases (decreases) resource prices and thus increases (decreases) long-run ATC of individual firms

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16
Q

Long-run supply curve for decreasing-cost industries

A

entry (exit) decreases (increases) resource prices and thus decreases (increases) long-run ATC of individual firms

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17
Q

Number of firms in a perfect competition market structure

A

many

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18
Q

number of firms in a monopolistic competition market structure

A

many

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19
Q

number of firms in an oligopoly market structure

A

few

20
Q

Type of product in a perfect competition market structure

A

same

21
Q

Type of product in a monopolistic competition market structure

A

different

22
Q

Type of product in an oligopoly

A

same or differentiated

23
Q

Type of product in a monopoly

A

unique

24
Q

Price setting power in perfect competition

A

None (price taker)

25
Q

Price setting power in monopolistic competition

A

Some

26
Q

Price setting power in an oligopoly

A

limited (more collusion)

27
Q

Price setting power in a monopoly

A

Major

28
Q

Non-price competition in perfect competition

A

none

29
Q

Non-price competition in monopolistic competition

A

ads, brands

30
Q

Non-price competition in an oligopoly

A

major

31
Q

Non-price competition in a monopoly

A

PR only

32
Q

Which market structure has both productive and allocative efficiency?

A

perfect competition

33
Q

Is there a long-run profit in pure competition?

A

no

34
Q

Is there a long-run profit in monopolistic competition?

A

no

35
Q

Is there a long-run profit in an oligopoly?

A

It is likely

36
Q

Is there a long-run profit in a monopoly?

A

yes

37
Q

When will short-run profit be positive or negative?

A

Profit if AR>ATC

Profit if P>ATC

38
Q

Where will all firms produce in the short run?

A

where MR=MC

39
Q

Where will competitive firms product in the short-run?

A

Where P=MC

40
Q

What is the triple equality?

A

P=MC=Min ATC

41
Q

Where does the triple equality hold true?

A

Only in constant-cost and increasing-cost industries

42
Q

Why doesn’t the triple equality hold true for decreasing-cost industries?

A

Because MC always remains below ATC if average costs are decreasing

43
Q

When is there allocative and productive efficiency in pure competition?

A

When the economy is composed of increasing-cost or constant-cost industries

44
Q

How do consumers benefit from productive efficiency?

A

By paying the lowest product price possible

45
Q

When does allocative efficiency occur?

A

When it is impossible to produce any net gains for society by altering the combination of goods and services that are produced from society’s limited resources

APEC 1101 (10 decks)

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