Quiz9 Flashcards
For each example below, identify which statement is not characteristic of a perfectly competitive industry:
A. One firm produces a large portion of the industry’s total output.
B. There are many firms in the industry.
C. Their products are indistinguishable.
D. Firms can easily exit and enter the industry
A. One firm produces a large portion of the industry’s total output
For each example below, identify which statement is not characteristic of a perfectly competitive industry:
A. There are many buyers and sellers in the industry.
B. Consumers have equal information about the prices of firms’ products.
C. The products differ slightly in quality from firm to firm.
D. Many diners compete in a city.
C. The products differ slightly in quality from firm to firm
For each example below, identify which statement is not characteristic of a perfectly competitive industry:
A. Many taxicabs compete in a city.
B. The city’s government requires all taxicabs to provide identical service.
C. Taxicabs are virtually identical, and all drivers must wear a designated uniform.
D. The government also limits the number of taxicab companies that can operate within the city’s boundaries.
D. The government also limits the number of taxicab companies that can operate within the city’s boundaries
The perfectly competitive firm is said to be a
Price taker - it takes the price given by the market.
A perfectly competitive firm wants higher profits and has decided to raise the price of its product. As an economic consultant you would advise them to
Not do this since they would lose all of their sales to competitors.
Suppose that a firm in a perfectly competitive industry finds that at its current output rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. Furthermore, the firm is producing an output rate at which marginal cost is less than the average total cost at that rate of output.
Is the firm maximizing its economic profits?
No, if the firm was maximizing its economic profits the marginal cost would not be less than the average total cost at that rate of output
The demand curve for the perfectly competitive firm is
Perfectly elastic. The firm can sell all it wants at a given price. The firms demand curve is horizontal, or perfectly elastic.
For a perfectly competitive firm, price
Equals both average revenue and marginal revenue.
Profits are maximized for the perfectly competitive firm when the firm produces the quantity where
A. total revenue exceeds total cost by the greatest amount.
B. MC = MR.
C. P = MC.
D. All of the above.
D. All of the above
A firm will continue to operate in the short run, even at an economic loss, as long as
P is greater than minimum AVC.
The short-run break-even price for the perfectly competitive firm occurs where price equals
ATC.
When P = ATC the firm will have sufficient revenue to cover their variable and fixed costs, and will break even earning zero economic or normal profits.
In a competitive market, positive economic profits act to
attract new entrants into the industry.
In a monopoly market structure, the firm (the monopolist)
Is the whole industry
A monopolist is defined as
A single supplier of a good or service for which there is no close substitute.
A natural monopoly
Has economies of scale over a very large range of output.
has decreasing long run marginal costs over a very large range of output.
has decreasing long run total costs over a very large range of output.
