question
Firms in competitive price-searcher markets with low entry barriers face
answer
a downward sloping demand curve
question
Firms are free to set price, but face strong competitive pressure.
answer
Competition exists from existing firms and potential rivals
question
an alternative term of price searcher markets is
answer
monopolistic competition
question
Price searchers produce
answer
differentiated products - products that differ in design, dependability, location, ease of purchase, etc.
question
Rival firms produce similar products (good substitutes) and therefore each firm confronts
answer
a highly elastic demand curve
question
A profit-maximizing price searcher will expand output as long as
answer
marginal revenue exceeds marginal cost.
question
The price charged by a price searcher will be greater than its
answer
marginal cost
question
The entry of new firms will
answer
expand supply and lower price.
question
Economic losses will cause price searchers
answer
to exit from the market
question
Competitive price searchers can make either profits or losses in the ____ ____, but only zero economic profit in the ___ ___.
answer
short run, long run
question
What are the characteristics that define a competitive price- searcher market with low entry barriers (monopolistic competition)?
answer
many sellers, low entry barriers (u can open up a store and compete) , sell different but similar products
question
what are the decision rules that apply to competitive price searchers?
answer
the firm will close if MR < AVC or TR < TVC
question
Profit is when
answer
average total cost is below price
question
Loss is when
answer
Average total cost is above price
question
In the competitive price searcher market, the firm has
answer
some control over price. They can raise prices so that they are greater than their average variable cost. But as they raise price, quantity demanded is reduced.
question
if a price searcher is producing at a level of output such that its marginal cost is 6$ and its marginal revenue is 4$, the firm should
answer
increase price and decrease output.
question
What will occur if profits exist in the short run in a competitive price-searcher market?
answer
New firms will enter and steal some of the profits. thus, the demand for your firm's products will decrease and your demand curve will shift left.
question
if there are firms earning economic profit in a price-searcher market, new firms will ____, causing the market price to ____.
answer
enter, decrease
question
what will occur if losses exist in the short run in a competitive price-searcher market?
answer
Existing firms will have to leave bc they cannot cover their average variable cost.
question
what happens to profits in the long run?
answer
As firms enter and exit the industry, the firm's demand curve shifts until zero economic profit exists. Remember that when there is zero economic profit, we can still have positive accounting profit.
question
at zero profit
answer
there is no more entry or exit.
question
when a competitive price-searcher market is in long-run equilibrium, firms will charge a price that is equal to
answer
average total cost
question
What is an entrepreneur?
answer
Someone who makes decisions based upon untertainty, discovery, and business judgment.
question
entrepreneurs play a vital role in economic progress by
answer
discovering new products and services that create wealth
question
what is the difference between price taker and price searcher markets?
answer
due to advertising expenses, price searcher products will be priced higher than price taker products
question
what is price discrimination?
answer
the practice of selling the same good to two or more groups of people at different prices (coupons). ex: movie tickets, adult, kids and senior tickets. all diff prices.
question
Sellers may gain from price discrimination by charging
higher prices to groups of customers with
higher prices to groups of customers with
answer
more inelastic demand
question
Sellers may gain from price discrimination by charging
lower prices to groups of customers with
lower prices to groups of customers with
answer
more elastic demand
question
Which of the following is true regarding competitive price searcher markets?
answer
firms will enter when profits are being made which will cause prices to fall due to increased competition
question
The optimal output to produce for a price searcher firm with low entry barriers is
answer
where MR=MC, as most profits are made in that region
question
Firms will exit when losses are being made, thus shifting the demand curve to the ___ for firms remaining in the market.
answer
Right. When they leave there is more of a demand for others
question
In the long run, firms in a competitive price searcher market will earn
answer
zero economic profit. (just accounting profit)
question
The difference between a price taker market and a competitive price searcher market is
answer
the price searcher market will have higher prices due to differentiation
question
in order to effectively price discriminate, a firm must charge
answer
higher prices to the more inelastic group
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
