Chapter 9 Flashcards
Which of the following is NOT a determinant of market structure?
The capital-labour ratio of the firm
The term “perfect competition” refers to….
a type of market structure
In economics, perfect competition refers to a market structure where
each firm has zero market power
A firm is said to have “market power” only when
it has the ability to influence the price of its product
The theory of perfect competition is built on several assumptions, including that
any firm can easily enter or leave the industry
If a firm in a perfectly competitive market were to raise its price, its
revenue would fall dramatically
Given the usual assumptions about perfect competition, a perfectly competitive firm
can sell as much of its product as it wishes at the market price
A firm in a perfectly competitive market
has no power to influence the market price
The demand curve facing a perfectly competitive firm
is almost perfectly elastic at the market price
If the demand curve faced by a firm is downward sloping, we can reasonably believe that the
firm can influence the price of the product it sells
The market demand curve for a perfectly competitive industry is typically
downward slopping
Under perfect competition, the demand curve facing an individual firm is
infinite price elastic
Total revenue (TR) for an individual firm in a perfectly competitive market equals
p × q
Average revenue (AR) for an individual firm in a perfectly competitive market equals
(p × q)/q
