WEEK 6

Question 1

Assumptions in perfect competition

Answer 1

market has many buyers and sellers
Homogeneity of output
No barriers to ntry
Perfect info and low transacion cost

Question 2

Firms are what in perfect competition

Answer 2

Price takers

Question 3

Perfect competition is the benchmark of what

Answer 3

Efficiency

Question 4

What is the difference with perfect competition in the short run

Answer 4

Capital is fixed

Question 5

What does profit equal

Answer 5

Total revenue - Total costs

Question 6

What shape is the Profit graph

Answer 6

An n shape

Question 7

How to find total revenue

Answer 7

Price x quantity sold

Question 8

How to find average revenue

Answer 8

total revenue / quantity sold —- Price

Question 9

How to find marginal revenue

Answer 9

Differentiate total revenue

Question 10

In a perfectly competitive market when does profit maximising output level occur

Answer 10

When p=MC

Question 11

When is profit maximised

Answer 11

When marginal cost cuts marginal revenue from below on the graph

Question 12

How to find super normal profit

Answer 12

(AR x when mc meets MR) - (AC x when mc meets AC)

Question 13

how to find the profit maximising quantity when given a price

Answer 13

Find the Marginal cost and revenue and make em equal each other

Question 14

If a firm is operating what is the equation

Answer 14

Profit = TR - TC

Question 15

If shut down whats the equation

Answer 15

Profit = 0

Question 16

As long as what should the firm keep operating

Answer 16

TR covers the Vc (P greater than or equal to AVC)

Question 17

Firm shuts down when

Answer 17

P < AVC

Question 18

how to find the industry supply curve

Answer 18

The sum of individual firms supply curves

Question 19

What is free entry

Answer 19

The ability of a firm to enter an industry without a barrier

Question 20

in the long run all factors of production are what

Answer 20

variable

Question 21

In long run competitive equilibrium why do firms enter and leave

Answer 21

Attracted to super normal profits
Owing to losses

Question 22

When does long-run competitive equilibrium occur

Answer 22

At the point where the market price is equal to the minimum average total cost

Question 23

At the equilibrium firms earn what

Answer 23

Zero economic profit

Question 24

The existence of supernormal profits attracts what

Answer 24

new entrants into the industry

Question 25

When supply increases what happens under equilibrium in perfect comp

Answer 25

Pushes the price down - shifting the demand curve down until no super normal profits are made

Question 26

When super normal profits aren’t available what happens

Answer 26

There is no incentive for more firms to join so the industry turns into long run equilibrium