Market structures pt2

Question 1

Objectives for firms

Answer 1

Profit
Survival
Growth
Social/environmental concerns
Firms will change their behaviour based on what their objectives are

Question 2

Perfect competition

Answer 2

Theoretical extreme market, there are no real markets like this

Question 3

Perfect competition characteristics

Answer 3

Many buyers/sellers-extreme competition
Free market entry/exit-no barriers
Perfect information-consumers/firms are well informed
Homogenous products
Firms are profit maximisers and price takers(cant influence market price)

Question 4

Perfect competition close example

Answer 4

Farmers markets- Lots of buyers/sellers, Fairly homogenous product, Very similar pricing, Easy to get information

Question 5

Perfect competition graph information

Answer 5

Firms DC (demand curve) is horizontal (perfectly elastic) as they are price takers, cannot influence market price
Markets DC is normal-downwards sloping, law of demand still holds

Question 6

Perfect competition-Demand and supply

Answer 6

Demand and supply determines price in the market and firms that take that price cannot influence it

Question 7

Perfect competition profit

Answer 7

Resources are allocated efficiently with PC. In SR supernormal profit is made, in LR normal profit is made.

Question 8

Lower profits with PC

Answer 8

Firms cannot set a higher price or cant afford a lower price than market price due to cost of producing products. All consumers have access to the same products. Firms cant set themselves apart by charging premium price for higher quality products and services