compensates the inconveniences brought by the typos.
What does market structure refer to
Think about two markets: the telecommunication market and the agricultural market. In the...
What market structures do economists often discuss
Before we start, please keep in mind that the four market structures are just theoretical...
1.What does market structure refer to
They are also not very concerned with how much other (individual) farmers are going to produce.What causes the difference between the behavior of telecom companies and farmers
The answer is the market structure.
3.What market structures do economists often discuss
firms pricing and output decisions. The market structure determines the behavior of firms.
2.The Theory of Perfect Competition
Note: Perfect competition never exists in the real world....
In perfect competition, are there few or many buyers and...
In perfect competition, are goods homogeneous or...
Do buyers and sellers have perfect or imperfect...
Can firms enter the market freely, as long as they are...
Which of the following is not an assumption of the theory...
There are many sellers and many buyers, none of which is...
Perfect competition never exists in the real world.
Why do we want to study such an unrealistic situation
Well, it is an easy and yet powerful model
7.In perfect competition, are goods homogeneous or differentiated
8.Do buyers and sellers have perfect or imperfect information in perfect competition
9.Can firms enter the market freely, as long as they are willing to pay the fixed cost
Each firm produces and sells a differentiated product.
Buyers and sellers have all relevant information with respect to prices, product quality, and sources
10.Which of the following is not an assumption of the theory of perfect competition
There is easy entry and exit.
In the theory of perfect competition,
sellers of the product are not influenced by other sellers and therefore have virtually complete
control over the production and pricing of their product.
buyers of the product may have a preference as to whom they purchase from based on brand
buyers and sellers of the product know everything that there is to know about the product.
it can be quite expensive for a firm to enter this type of market, but once the firm is established, it
12.Which of the following is a characteristic of perfect competition
13.Which of the following is not a characteristic of perfect competition
14.What does a price-taker mean
17.What if the supplier charges a lower price
18.Since the supplier will earn less profit if he/she deviates from the market price, what price should the supplier charge
Can I hit an officer?)
2.2.The Demand Curve for a Perfectly Competitive Firm Is Horizontal
This section explains why the demand curve of an individual firm is horizontal. If you find the explanation in
Can I hit an officer
Remember that the total sales of the market are huge relative to an individual firms output. If a firm changes the quantity it wants to sell (so the total sales of the market change by the same amount), will that affect the market price much
We can also use the concept of demand elasticity to understand why the demand curve of an individual firm is horizontal.
Recall that the more substitutes there are for a good, the higher the price elasticity of demand. In perfect
firm good is perfectly elastic.
Recall that a perfectly elastic demand curve is horizontal (Page 118, Exhibit...
If the demand curve is horizontal, does the firm need to drop its price to...
Where does the demand curve of an individual firm intersect with the vertical axis
The market price is 10. Draw the demand curve of an individual firm.
Recapture the reasons why a firm does not want to deviate from the market price.
Read Finding ECONOMIS: When Selling Shares of Stock. The market price of stock...
24.Where does the demand curve of an individual firm intersect with the vertical axis
27.Read Finding ECONOMIS
When Selling Shares of Stock.
that the demand curve is horizontal.
2.3.The Marginal Revenue
The market price of a good is 10. What is a firms revenue when it supplies 10 units? What is the total revenue when it suppliers 11 units? Find the marginal revenue of the 11th unit of product.
What is the marginal revenue of a perfectly competitive firm equal to
Isnt it true that '='' for any firms, regardless of the market structure
33.What is the marginal revenue of a perfectly competitive firm equal to
Summary In a perfectly competitive market, a firms marginal revenue is equal to the market price, since the price will not change as an additional unit of good is sold. This might not be true in other market structures, where the market price drops when an additional unit of good is sold.
2.4.Theory and Real-World Markets
What markets are usually cited as example of...
When can we use the theory of perfect...
Real-world markets that approximate the four...
some agricultural markets.
the soft drink market.
the stock market.
a and c
a, b, and c
Does a real-world market have to meet all the...
35.What markets are usually cited as example of perfect competition
36.When can we use the theory of perfect competition to predict the markets behavior
considered a perfectly competitive market
No, probably no real-world market meets all the assumptions of the theory of perfect competition.
All that is necessary is that a real-world market behave as if it satisfies all the assumptions.
Yes, if a real-world market does not meet the assumptions, then it cannot be considered a perfectly
Yes, unless it is a new market such as the computer market. New markets are not held to the same
assumptions as old, more established markets.
No, but it does have to meet the assumption of producing and selling a homogeneous product. It
does not have to fully meet the other assumptions.
Which of the following is probably the worst real-world example of a perfectly competitive market
the market for corn
the market for automobiles
the stock market
the market for wheat
Which of the following statements is false
The perfectly competitive firm's demand curve is horizontal at the market price.
The theory of perfect competition is completely and accurately descriptive of most real-world
39.Which of the following is probably the worst real-world example of a perfectly competitive market
40.Which of the following statements is false
If Firm X does not strictly meet all the assumptions of the theory of perfect competition, but
behaves as if it does, then the theory of perfect competition is relevant to it.
In perfect competition, the market price is established at the intersection of the market demand and
market supply curves.
Which of the following is the best example of a homogeneous good
41.Which of the following is the best example of a homogeneous good
Summary: The assumptions of a perfectly competitive market are met only in few real world markets. However, if a market approximates the assumptions to a degree that it behaves as if it were a perfectly competitive market, we can do so.
3.Perfect Competition in the Short Run
3.1.Output Level: Maximizing the Variable Profit
In this section, we assume that a firm has already paid the fixed...
What notation/concept do we use to denote the extra cost incurred...
If MCMR, shall the firm produce that unit of product? What if MCMR
At which output level will a firm settle (i.e., when is the...
Use MC and MR curves to illustrate the determination of optima
The assumptions of a perfectly competitive market are met only in few real world markets
Maximizing the Variable Profit.
45.At which output level will a firm settle (i.e., when is the variable profit maximized)
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