Week 6: Market Structure & Performance

Question 1

If MR < MC, the extra revenue from selling more unit is ___ than the extra cost.

Answer 1

less

Question 2

If MR = MC, economic profit is

Answer 2

maximised.

Question 3

At short-run equilibrium, firms may:

Answer 3

• Earn a profit
• Break even
• Incur an economic loss

Question 4

A perfectly competitive market has the following characteristics:

Answer 4

• There are many buyers and sellers in the market
• The goods offered by the various sellers are largely the same; homogenous
• Firms can freely enter or exit the market; no barriers to entry

Question 5

A perfectly competitive market has the following outcomes:

Answer 5

• The actions of any single buyer or seller in the market have a negligible impact on the market price
• Each buyer and seller takes the market price as given (price takers)