T5 - Perfect comp

Question 1

Is perfect comp realistic

Answer 1

No

Question 2

What do firms not compete on in perfect comp

Answer 2

Marketing
Differentiation
Brand image
R and D

Question 3

Features of perfect comp

Answer 3

Many sellers
Price takers
Indiviual buyers
No barriers to entry or exist
No sunk cost
Homogeneous products
Perfect info
Perfectly movile factors
No externalities

Question 4

Which firm can affect market price in a perfect comp market

Answer 4

Noen

Question 5

What type of demand curve is there for perfect comp

Answer 5

Perfectly elastic

Question 6

When should firms produce

Answer 6

AT MC = MR

Question 7

What is the market response to changes in prices

Answer 7

Firms will enter or leave markets, same with consumers

Question 8

Firms responses to changes in price

Answer 8

They will have to change output, so they operate at MC = MR

Question 9

What is the long run equalibrium position for a firm in perfect comp

Answer 9

ATC = AR

Question 10

When is there normal profit

Answer 10

ATC = AR

Question 11

When firms are making a loss at a given output what happens to the market

Answer 11

Supply shifts to the left

Question 12

What are the efficencies of perfect comp

Answer 12

Allocative efficency at P = MC
Productiev efficecy - Lowest point on AC
FIrms are unlikely to be dynamically efficeny

Question 13

What is allocative efficiency

Answer 13

Occurs when it is possible to improve eco welfare by reallctiong resource between markets

Question 14

What has to equal what to indicate resources being allocated accordingly

Answer 14

MC = P

Question 15

When is there allocative inefficency

Answer 15

P > MC
P < MC

Question 16

What are the inefficiencies of perfect comp

Answer 16

No scope for EoS
Lack of supernormal profits dissallowing dynamic effieciencu

Question 17

Why are perfect comp markets not realistic

Answer 17

Suppliers can control supply
Consumers may have monopsony piwer
Always is barriers to entry
There always is product diff
Cosumers dont have perfect info
Firms dont have perfect info
Always will be externaltiies

Question 18

what are perfect markets of any sort charactersied by

Answer 18

unlimited buyers and sellers
no bte or exit
perfect info
price takers, wage takers
identifial or perfetc substirues
no price cotnrol
no externalitites, allocatiev efficiency

Question 19

in perfect markets what doprice/wage adn quantity redlect

Answer 19

supply and demand

Question 20

why in eprfect markets and shit will there be social optimum elevl of output a

Answer 20

as consuemrs have all information can make rationl descion, leadign to no

PIMMFACED

esespcailly no info failirue, oc of demrrit goods, no uc of merit goods
factor immobility etc etc

Question 21

talk through perfect comp short and long run

Answer 21

in short run firms make supernormal profits, limited supply in market

new firms attracted to profit levels

enter with ease

will eneter up until firms can operate at lowest possible costs and they cannot be mroe prodcutively efficnet

logn run equilbirum will lead to producitve, allocateive effficny

normal profits

Question 22

why is the ar/mr line horiziotnal

Answer 22

demand is perfectly elastic

if price changed, consumers go elswhere

mr is horzitnoal as regarldess of qty price stays same