LESSON 1 FINALS Flashcards
refers to a seller that does not have the ability to
control the price of the product it sells. The seller takes the
price determined in the market.
Price taker
The seller takes the
price determined in the market. T OR F
TRUE
Is established
at the intersection of the market
demand and market supply curves
equilibrium price
equilibrium price has been
established, a single perfectly
competitive firm faces a vertical
(flat, perfectly elastic) T or F
FALSE ( HORIZONTAL)
The firm takes the equilibrium price
as given, hence it is a price taker. T OR F
TRUE
If the firm tries to charge a price higher than the market-established
price, it will sell many of its products. T or F
FALSE ( IT WONT)
If the firm wants to maximize profits, it does not offer to sell its good
at a lower price than the equilibrium price. T OR F
TRUE
The equilibrium price is the only relevant price for the perfectly competitive firm. T OR F
TRUE
states an inverse
relationship between price and quantity
demanded. The curve must be downward
sloping.
The law of demand
A single perfectly competitive firm’s flat demand
curve simply represents its
pricing situation.
is the change
in TR that results from selling one
additional unit of output.
firm’s marginal revenue
firm’s marginal revenue at any output
level is always not equal to the equilibrium
price. T OR F
FALSE ( EQUAL)
says
that a firm produces quantity of
output at which MR=MC2
Profit Maximization Rule
Each firm produces and sells a homogenous product and Firms have easy entry and exit
Perfect Competition
The single seller sells a product that has no close substitute.
The barriers to entry are extremely high
Monopoly
Monopolies can exist as?
government monopoly or market monopoly.
a right that government grants to a firm and that permits the firm to provide a
particular good or service and excludes all others from doing so (eliminating potential competition by
law)
Public Franchise
patent holders are shielded from competitors; no one else can legally produce and sell the
patented product or process
Patents
required for entry into some industries & occupations
Government Licenses
In monopoly competition New entrants
must enter on a small scale. T OR F
FALSE (LARGE SCALE)
If economies of scale are so pronounced that only one firm
can survive in the industry, the firm is called a?
natural monopoly
defined as a seller that has
the ability to control to some degree the price of the product
it sells.
price searcher
Industry, they are one and the same. The
demand curve of the this firm is the same for the
industry (downward sloping)
Monopoly firm
More is sold at lower prices than at higher prices, ceteris
paribus. T OR F
TRUE
In perfect competition, the firm’s demand
curve is not the same as its MR curve. T OR F
FALSE (SAME)
In monopoly, the firm’s demand curve is
not the same as its MR curve. T OR F
TRUE
Legal Barriers of monopoly firms
Public franchise
Patents
Government licenses
