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Economists use the term imperfect competition to describe:
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those markets which are not purely competitive.
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In which of the following industry structures is the entry of new firms the most difficult?
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pure monopoly
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An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of:
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oligopoly
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An industry comprised of a very large number of sellers producing a standardized product is known as:
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pure competition
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Which of the following is not a characteristic of pure competiton?
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price strategies by firms
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If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
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will also be $5.
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The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
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downsloping, perfectly elastic
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Marginal revenue is the:
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change in total revenue associated with th esale of one more unit of output.
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A competitive firm in the short run can determine the profit maximizing (or loss-minimizing) output by equating:
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marginal revenue and marginal cost
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In the short run a purely competitive firm that seeks to maximize profit will produce:
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where total revenue exceeds total cost by the maximum amount.
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Refer to the above diagram, which pertains to a purely competitive firm: Curve A represents
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total revenue only
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Curve C represents:
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average revenue and marginal revenue
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The MR = MC rule applies:
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to firms in all types of industries
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A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:
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total variable costs
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To maximize profit or minimize losses this firm will produce:
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where MR=MC
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Total Revenue will be:
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where MR=MC, P X Q
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Total Fixed cost is equal to:
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in between AVC and ATC, multiply T X R
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Total Variable cost is:
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0CFE
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At the profit maximizing output, the firm will realize.
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an economic profit at ABGH
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The lowest price a firm should produce (as apposed to shutting down is)
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P2
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The firm will produce at a loss at all prices:
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between P2 and P3
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If the product price is P3
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Economic profits will be 0.
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The firm's short run supply curve:
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BCD segment of the MC curve. - AVC going up
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If the market price for the firm's product is $12, the competitive firm will produce:
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zero units at a loss of $100. (Price is less than ATC and AVC - shutdown)
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If the market price for the firm's product is $32, the competitve firm will produce:
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8 units - economic profit of $16
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If the market price is $28, the firm will produe:
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7 units, loss of $14
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In a purely competitive industry:
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there may be economic profits in the short run but not in the long run.
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long-run competitive equilibrium
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results in zero economic profits.
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A firm is producing output such that the benefit from one more unit is more than the cost of producing that additional unit
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producing less output than allocative efficiency requires.
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If P = ATC
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no economic profit
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If P < ATC (< AVC),
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shutdown
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If P > ATC
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the firm is making a profit
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If P < ATC > AVC
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economic loss
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Pure competior is always
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allocatively efficient
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