Market structures Flashcards
Does Perfect competition achieve efficiency?
YES! productive and allocative
Perfect competition characteristics
many firms, standard product, price takers, easy entry and exit
Where will perfect competition produce in the short run?
mr=mc (profit maximizing)
Perfect competition in the long run
no exit or entry, mrdarp=ATC min (productive efficiency)
0 economic profit
*only variable costs will change output
Characteristics of a monopoly
single seller, no close substitute, price makers, blocked entry
Monopoly efficiency
cannot achieve productive or allocative efficiency
Why is MR lower than demand in monopoly?
to sell more product you must lower the price of each unit
Where does a monopoly operate on the demand curve?
elastic portion
What happens to a monopoly in the long run?
NOTHING
Characteristics of monopolistic competition
relatively easy entry and exit, product differentiation, small market shares, no collusion, independent action
Does monopolistic competition have control over the price?
partial control
Is monopolistic competition efficient?
not productive or allocatively efficient in the long run
