Unit Perfect Competition Unit Overview

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Unit Perfect Competition Unit Overview"

Transcription

1 Unit erfect competition Assumptions of the model Demand curve facing the industry and the firm in perfect competition rofit-maximizing level of output and price in the short-run and long-run The possibility of abnormal profits/losses in the short-run and normal profits in the long-run Shut-down price, break-even price Definitions of allocative and productive efficiency Efficiency in perfect competition Unit Unit Overview Blog posts: "erfect competition" Blog posts: "rofit maximization" 222'2*34*+52#4#"/0#-5'-/0 6

2 Characteristics of erfectly Competitive markets Discussion question: What will happen to the price of pizza when YOU demand more pizza? What about when you and your closest friends demand more pizza? Explain what will happen and why? Discussion: Clearly, nothing will happen to the price of pizza when you or your closest friends demand more pizza. You pay the price that the market has determined. Similarly, in a purely competitive market, nothing will happen to the price of a product when one firm (or a few firms) begin supplying more output. Firms in perfectly competitive markets are price takers. No individual firm exerts enough market power to influence the price. Firms must adjust to the market price, they cannot charge anything above the market price, or demand for their output will fall to ZERO. In other words, purely competitive firms face a perfectly elastic demand curve! 222'2*34*+52#4#"/0#-5'-/0 &

3 Characteristics of erfectly Competitive markets Many sellers: means that there are enough so that a single seller has no impact on price by its decisions alone. Standardized products: The products in a purely competitive market are homogeneous or standardized; each seller s product is identical to its competitor s. rice-takers: Individual firms must accept the market price; they are price takers and can exert no influence on price. Freedom of entry and exit: means that there are no significant obstacles preventing firms from entering or leaving the industry. ure competition is rare in the real world, but the model is important. >>The model helps analyze industries with characteristics similar to pure competition. >>The model provides a context in which to apply revenue and cost concepts developed in previous chapters. >>ure competition provides a norm or standard against which to compare and evaluate the efficiency of the real world. 222'2*34*+52#4#"/0#-5'-/0 (

4 Demand as seen by a C seller Why study pure competition if actual purely competitive markets do not exist? urely competitive markets represent allocative efficiency. The operation of a purely competitive economy provides a standard, or norm for evaluating the efficiency of the real-world economy. The individual firm will view its demand as perfectly elastic. The demand curve is not perfectly elastic for the industry: It only appears that way to the individual firm, since it must charge the market price no matter what quantity it produces. urely competitive firms are price takers!!! What happens if the firm increases its output? >>Market price stays same Lowers its output? >>SAME equilibrium price! Definitions of average, total, and marginal revenue: Average revenue (AR) is the price per unit for each firm in pure competition. AR= Total revenue (TR) is the price multiplied by the quantity sold. TR = Marginal revenue (MR) is the change in total revenue that results from selling 1 more unit of output. MR will also equal the unit price in conditions of pure competition. 222'2*34*+52#4#"/0#-5'-/0 7

5 Demand as seen by a C seller erfectly Competitive Industry S industry erfectly Competitive Firm e D firm MR=AR= D industry A C firm is a price taker: The price faced by each firm is determined by market supply and demand Since price equals average revenue, the firm's demand curve also represents the firm's average revenue at each level of output. Since the firm can sell as much as it wants at e, the marginal revenue equals the price. Therefore: MR = D = AR = 222'2*34*+52#4#"/0#-5'-/0 8

6 rofit Maximization - Total Revenue and Total Cost Costs and Revenues rofit = Total Revenue - Total Cost Max profit! TR TC Total Revenue = rice x uantity Since the price a C firm receives is constant at all levels of the firm's output, TR increases at a constant rate with output. rofit maximization: Economic rofit = TR - TC. The firm wants to produce the level of output at which the vertical distance between TR and TC is greatest. Break even point rofit-max point Break even point Normal profit: the minimum level of profit needed just to keep an entrepreneur operating in his current market. If he does not earn normal profit, an entrepreneur will direct his skills towards another market. Break even points: TR and TC are equal, meaning the firm is earning a normal profit but zero economic profits. Economic profit: also called "super-normal profits". When revenues exceed all costs and normal profit. Firms are attracted to industries where economic profits are being earned 222'2*34*+52#4#"/0#-5'-/0 9

7 rofit maximization: Marginal Revenue = Marginal Cost A firm will maximize its profits when it produces at the point where its marginal cost of production is equal to its marginal revenue. MR = MC This maximizes profits because any time the last unit produced brings more additional revenue (MR) than it incurs in additional cost (MC), the firm can increase its profits by producing that unit On the other hand, if the last unit produced incurs a more additional cost (MC) than it brings in additional revenue, then the firm's profits will decline if it produces that unit. Conclusion: When MR>MC at the margin, the firm will profit by producing more. When MC>MR at the margin, the firm will profit more by producting less. Only when MC=MR is the firm doing the best it possibly can! This rule applies only when producing is preferable to shutting down. If MR<, the firm would be better off shutting down. The rule applies to all market structures In pure competition, the rule can also be stated as the =MC rule, since marginal revenue equals price in a purely competitive market. ractice rofit-maximization: Rainbow book Activity '2*34*+52#4#"/0#-5'-/0 :

8 A firm will produce where MR = MC: rofit maximization: MR = MC Shoe Market /C Shoe Firm MC S industry e MR=D=AR= 1 MR=D=AR= 1 D 1 D industry The profit-maximizing level of output by the firm depends on the price determined by the market 1) e is determined by the total market supply and demand. 2) The firm faces its own marginal cost curve 3) The firm will choose to produce at the level of output where the MC equals MR 4) If MR falls because of falling demand, profit maximizing level of output for the firm falls '2*34*+52#4#"/0#-5'-/0 ;

9 rofit-maximizing case: Shoe Market rofit maximization: MR = MC S industry /C Shoe Firm MC ATC e ATC MR=D=AR= 1 D industry e rofit = TR - TC No TR and TC curves in the firm diagram, but there is AR and ATC er unit profit = AR - ATC To determine the amount of a C firm's profit, subtract ATC from AR at the profit-maximizing level of output. f Is the firm above earning economic profits? Yes, because average revenue is greater than average cost! Total profits = (AR - ATC) x 222'2*34*+52#4#"/0#-5'-/0 <

10 uick uiz A firm in perfect competition is producing at the profit maximizing output, but making a loss. Using diagrammatic analysis, explain how this is possible. (Total 10 points) The profit maximizing output is where MC = MR. If, at this output, AC is greater than AR, the firm will make a loss in the short run. Answers should illustrate this point using the standard perfect competition diagram. roviding the above is clearly and accurately explained and illustrated, nothing further would be required for full marks. It would be extremely difficult to fully answer this question without the use of a diagram, and a maximum of [6 marks] should be awarded if there is no appropriate diagrammatic illustration. [10 marks] 222'2*34*+52#4#"/0#-5'-/0 6=

11 Loss-minimizing case: rofit maximization: MR = MC C Industry S industry /C C Firm MC ATC ATC e MR=D=AR= 1 D industry If the firm's costs increase or the price it can sell for decreases, it may be in a situation where it must minimize losses. ATC > AR, the firm is losing money on each unit it produces. The AR is still greater than, meaning the firm can cover its variable costs in the short-run The firm will remain open as long as it can cover its variable costs f AR - ATC is negative, meaning the firm is experiencing losses Total loss = (ATC-AR) x s 222'2*34*+52#4#"/0#-5'-/0 66

12 Shut-down scenario: rofit maximization: MR = MC C Industry /C C Firm ATC S industry MC ATC Loss e MR=D=AR= 1 D industry f If the supply in the industry increases or demand falls, or if the firm's costs increase, it may be in a situation where it would be better off shutting down. Why shut down? Because at every level of output, the firm's average variable cost is higher than its average revenue. This firm is not even earning enough revenue to pay its workers or pay for raw materials! The firm MUST SHUT DOWN! 222'2*34*+52#4#"/0#-5'-/0 6&

13 Long-run Equilibrium Discussion uestion: How will the existence of economic profits in a purely competitive market affect the total supply in that market? Remember, FIRMS ARE ROFIT SEEKERS! Answer: Because there are NO BARRIERS TO ENTRY, new firms will enter a market where profits are being earned. As new firms enter, market supply will shift out, lowering the market price faced by firms, eliminating economic profits. uestion: How will the existence of economic losses among the firms in a purely competitive market affect the total supply in the market? Answer: Because firms are loss averse, and there are NO BARRIERS TO EXIT, some firms will leave the industry, reducing market supply, increasing the price, eliminating losses for the remaining firms! 222'2*34*+52#4#"/0#-5'-/0 6(

14 Entry eliminates profits: Long-run Equilibrium C Industry S industry /C C Firm MC 1 economic profit ATC MR=D=AR= D industry The firm above is earning economic profits because AR > ATC at its current level of output. What will happen to the firm's profits in the long-run? Why? Illustrate the long-run changes that will occur on the graphs f 222'2*34*+52#4#"/0#-5'-/0 67

15 Exit eliminates losses: Long-run Equilibrium C Industry S industry /C C Firm MC ATC ATC e MR=D=AR= 1 D industry f The firm above is losing money becaues AR < ATC at its current level of output. What will happen to the firm's losses in the long-run? Why? Illustrate the long-run changes that will occur on the graphs 222'2*34*+52#4#"/0#-5'-/0 68

16 Long-run equilibrium in C: Long-run Equilibrium C Industry S industry /C C Firm MC ATC 1 MR=D=AR= D industry The industry above is earning in long-run equlibirum: f Why? How would an increase in demand affect the industry? A decrease? How would an increase in the firms' costs affect the industry? A decrease? ractice SR and LR Equilibrium: Rainbow book Activity '2*34*+52#4#"/0#-5'-/0 69

17 Marginal Cost as the firm's Supply Curve C firms adjust their output in response to changes in price. A C firm will shut down when MR falls below. C Firm MC When MR is above, the firm will increase its output as price increases according to its upward sloping MC curve. 4 3 Firm's Supply curve MR 4 MR 3 The MC curve above shows a direct relationship between rice (AR) and quantity supplied. 2 1 MR 2 MR 1 The MC curve above IS THE INDIVIDUAL FIRM'S SULY CURVE! 222'2*34*+52#4#"/0#-5'-/0 6:

18 Marginal Cost as the firm's Supply Curve oints to understand about the MC curve as the firm's short-run supply curve The MC increases as ouput increases because of diminishing marginal returns C Firm MC Since the MC increases at higher level of ouput, firms require a higher prices in order for them to increase output, so they can maintain the MR=MC level and maximize profits. Firm's Supply curve In other words, the MC curve represents the relationship between price and quantity supplied. This is a direct relationship (demonstrating the law of supply!) What would cause the firm's supply (MC) curve to shift? Changes in the prices of variable inputs: For example, a higher minimum wage will shift the cost curve of a firm employing minimum wage workers U. This corresponds to a leftward shift of the firm's supply curve. Improvements in technology will shift MC down: since better technology makes all workers more productive (shift the M and A curves up, thus the MC and curves down). This corresponds with an outward shift of the firm's supply curve 222'2*34*+52#4#"/0#-5'-/0 6;

19 Marginal Cost and Market Supply C Firm MC C Market with 200 identical firms S=MC Firm's Supply curve $5 x200= MR=AR $5 D From the firm to the market - Marginal Cost = Supply: 200 identical firms making an identical product with identical costs Each firm produces the profit maximizing level of output based on where the price equals its MC Equilibrium output in the market is found at the intersection of market supply and market demand. Total quantity supplied equals the product of the individual firms' output multiplied by the number of firms 222'2*34*+52#4#"/0#-5'-/0 6<

20 Allocative and roductive Efficiency Discuss: "urely competitive markets are clearly undesirable. Firms in such markets are doomed to earning NO profits, so how could such a market be good for society?" Firms in purely competitive industries: Why are they winners? Why are they losers? Consumers in purely competitive industries: Why are they winners? Why are they losers? ractice graphing C: NCEE workbook Activity '2*34*+52#4#"/0#-5'-/0 &=

21 Allocative and roductive Efficiency In long-run equilibrium, purely competitive firms will produce at the level of output where the price equals firms' marginal cost and its minimum average total cost. This represents roductive Efficiency: = minimum ATC Interpretation: The firms are using resources to their maximum efficiency by producing their output at the lowest possible average total cost. Competition forces firms to use resources as efficiently as possible. Allocative Efficiency: = MC Interpretation: The right amount of output is being produced. There is neither under nor over-allocation of resources towards a good in a purely competitive industry. If the price were higher than the marginal cost, this is a signal that more output is desired, if price were lower than marginal cost, the signal from buyers to sellers is that less output is desired. Only when = MC is the right amount of output being produced. 222'2*34*+52#4#"/0#-5'-/0 &6

22 Discussion uestions: Allocative and roductive Efficiency rice as a signal from consumers to producers: If the price of a lattes goes up, it is a signal to producers that consumers wants more lattes, so more resources should be allocated towards the production of lattes. As firms produce more lattes, their MC will increase until = MC once more. Only then have the right amount of lattes been produced! ALLOCATIVE EFFICIENCY is achieved when = MC! Allocative Efficiency: Is = MC good for society? Why or why not? roductive Efficiency: Is = min. ATC good for society? Why or why not? Are ZERO economic profits bad for firms? Why or why not? 222'2*34*+52#4#"/0#-5'-/0 &&

23 ractice Free Response uestion Luigi's, a typical profit-maximizing pizzeria, is operating in a perfectly competitive industry that is in long-run equilibrium. (a) Draw correctly labeled side-by-side graphs for the pizza market and for Luigi's and show each of the following. (i) rice and output for the market (ii) rice and output for Luigi's (b) Assume that pizza is a normal good and that consumer income falls. Assume that Luigi's continues to produce. On your graphs in part (a), show the effect of the derease in income on each of the following in the short run. (i) rice and output for the industry (ii) rice and output for Luigi's (iii) Area of loss or profit for Luigi's (c) Following the decrease in consumer income, what must be true for Luigi's to continue to produce in the short run? (d) Assume that the market adjusts to a new long-run equilibrium. Compare the following between the initial and the new long-run equilibrium. (i) rice in the industry (ii) Output of a typical firm (iii) The number of firms in the dairy industry 222'2*34*+52#4#"/0#-5'-/0 &(

24 ractice problems Describe the situation in the market below and firm below. Show the firm's i) MR, ii) Output, iii) Economic profit or loss Assuming this is a C market, describe and illustrate the long run adjustments that will restore this market to Equilibrium. Show on the graphs, for both the industry and the firm, the price and output after long-run adjustments Industry S industry Firm MC ATC e MR=D=AR= 1 D industry 222'2*34*+52#4#"/0#-5'-/0 &7

25 ractice problems Describe the situation in the market below and firm below. Show the firm's i) MR, ii) Output, iii) Economic profit or loss Assuming this is a C market, describe and illustrate the long run adjustments that will restore this market to Equilibrium. Show on the graphs, for both the industry and the firm, the price and output after long-run adjustments Industry S industry Firm MC ATC e MR=D=AR= 1 D industry 222'2*34*+52#4#"/0#-5'-/0 &8

26 ractice problems Describe the situation in the market below and firm below. Show the firm's i) MR, ii) Output, iii) Economic profit or loss Assuming this is a C market, describe and illustrate the long run adjustments that will restore this market to Equilibrium. Show on the graphs, for both the industry and the firm, the price and output after long-run adjustments Industry S industry Firm MC ATC e MR=D=AR= 1 D industry 222'2*34*+52#4#"/0#-5'-/0 &9

27 ractice problems Describe the situation in the market below and firm below. Assume price of a close substitute drops. Illustrate the changes that will occur in this market: Show the new industry price and output Show the new firm price and output Industry S industry Firm MC ATC e MR=D=AR= 1 D industry 222'2*34*+52#4#"/0#-5'-/0 &:

28 ractice problems Describe the situation in the market and firm below. Assume this product is featured in a new movie and consumers' tastes shift towards it overnight. Illustrate the changes that will occur in this market: Show the new industry price and output Show the new firm price and output Industry S Firm industry MC ATC e MR=D=AR= 1 D industry 222'2*34*+52#4#"/0#-5'-/0 &;

29 Unit uiz 1.Distinguish between normal profits and economic profits. Explain why firms in a perfectly competitive market are likely to earn only normal profits in the long-run. 2. What is meant by economic efficiency? How do purely competitive markets assure that economic efficiency is achieved? 222'2*34*+52#4#"/0#-5'-/0 &<

30 !""#$%&'(")!*+,$-./(,"012("

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine

More information

Problems on Perfect Competition & Monopoly

Problems on Perfect Competition & Monopoly Problems on Perfect Competition & Monopoly 1. True and False questions. Indicate whether each of the following statements is true or false and why. (a) In long-run equilibrium, every firm in a perfectly

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

More information

Chapter 14: Firms in Competitive Markets. Total revenue = price per unit sold number of units sold = p q

Chapter 14: Firms in Competitive Markets. Total revenue = price per unit sold number of units sold = p q Chapter 14: Firms in Competitive Markets Profit and Revenue The firm's goal is to maximize profit. Profit = total revenue - total cost (opportunity cost) Total revenue = price per unit sold number of units

More information

CHAPTER 9: PURE COMPETITION

CHAPTER 9: PURE COMPETITION CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MPP 801 Perfect Competition K. Wainwright Study Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Refer to Figure 9-1. If the price a perfectly

More information

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run?

c. Given your answer in part (b), what do you anticipate will happen in this market in the long-run? Perfect Competition Questions Question 1 Suppose there is a perfectly competitive industry where all the firms are identical with identical cost curves. Furthermore, suppose that a representative firm

More information

Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

More information

Pre-Test Chapter 21 ed17

Pre-Test Chapter 21 ed17 Pre-Test Chapter 21 ed17 Multiple Choice Questions 1. Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exodus

More information

Chapter 6 Competitive Markets

Chapter 6 Competitive Markets Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

More information

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

More information

Chapter 13 Perfect Competition

Chapter 13 Perfect Competition Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small

More information

Essential Graphs for Microeconomics

Essential Graphs for Microeconomics Essential Graphs for Microeconomics Basic Economic Concepts roduction ossibilities Curve Good X A F B C W Concepts: oints on the curve-efficient oints inside the curve-inefficient oints outside the curve-unattainable

More information

Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen

Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Understanding Economics 2nd edition by Mark Lovewell and Khoa Nguyen Chapter 5 Perfect Competition Chapter Objectives! In this chapter you will: " Consider the four market structures, and the main differences

More information

11 PERFECT COMPETITION. Chapter. Competition

11 PERFECT COMPETITION. Chapter. Competition Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

More information

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

More information

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

More information

Chapter 9: Perfect Competition

Chapter 9: Perfect Competition Chapter 9: Perfect Competition Perfect Competition Law of One Price Short-Run Equilibrium Long-Run Equilibrium Maximize Profit Market Equilibrium Constant- Cost Industry Increasing- Cost Industry Decreasing-

More information

Unit 2.3 - Theory of the Firm Unit Overview

Unit 2.3 - Theory of the Firm Unit Overview Unit 2.3.1 - Introduction to Market Structures and Cost Theory Intro to Market Structures Pure competition Monopolistic competition Oligopoly Monopoly Cost theory Types of costs: fixed costs, variable

More information

Profit Maximization. 2. product homogeneity

Profit Maximization. 2. product homogeneity Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out

More information

Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

More information

Chapter 8. Competitive Firms and Markets

Chapter 8. Competitive Firms and Markets Chapter 8. Competitive Firms and Markets We have learned the production function and cost function, the question now is: how much to produce such that firm can maximize his profit? To solve this question,

More information

PART A: For each worker, determine that worker's marginal product of labor.

PART A: For each worker, determine that worker's marginal product of labor. ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

More information

AP MICROECONOMICS 2015 SCORING GUIDELINES

AP MICROECONOMICS 2015 SCORING GUIDELINES AP MICROECONOMICS 2015 SCORING GUIDELINES Question 1 10 points (1+5+1+3) (a) 1 point: One point is earned for stating that the firm s price is equal to the market price because the firm is a price taker.

More information

chapter Perfect Competition and the >> Supply Curve Section 3: The Industry Supply Curve

chapter Perfect Competition and the >> Supply Curve Section 3: The Industry Supply Curve chapter 9 The industry supply curve shows the relationship between the price of a good and the total output of the industry as a whole. Perfect Competition and the >> Supply Curve Section 3: The Industry

More information

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

More information

Unit 7. Firm behaviour and market structure: monopoly

Unit 7. Firm behaviour and market structure: monopoly Unit 7. Firm behaviour and market structure: monopoly Learning objectives: to identify and examine the sources of monopoly power; to understand the relationship between a monopolist s demand curve and

More information

ANSWERS TO END-OF-CHAPTER QUESTIONS

ANSWERS TO END-OF-CHAPTER QUESTIONS ANSWERS TO END-OF-CHAPTER QUESTIONS 23-1 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications

More information

Microeconomics Instructor Miller Practice Problems Monopolistic Competition

Microeconomics Instructor Miller Practice Problems Monopolistic Competition Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.

More information

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on

More information

CHAPTER 10: PURE MONOPOLY

CHAPTER 10: PURE MONOPOLY CHAPTER 10: PURE MONOPOLY Introduction While the perfectly competitive firm has no power over prices in the marketplace, the monopoly has the power necessary to determine both the price and output of the

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a

More information

Unit 3 Practice Exam Answer the questions on a separate sheet of paperplease do not write on this practice test.

Unit 3 Practice Exam Answer the questions on a separate sheet of paperplease do not write on this practice test. Unit 3 Practice Exam Answer the questions on a separate sheet of paperplease do not write on this practice test. 1. Which of the following items is most likely to be an implicit cost of production? a.

More information

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits.

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Profit depends upon two factors Revenue Structure Cost Structure

More information

STATE COUNCIL OF EDUCATIONAL RESEARCH &TRAINING. Question Bank With Solution For Class XII PGT (Economics)

STATE COUNCIL OF EDUCATIONAL RESEARCH &TRAINING. Question Bank With Solution For Class XII PGT (Economics) STATE COUNCIL OF EDUCATIONAL RESEARCH &TRAINING VARUN MARG, DEFENCE COLONY, NEW DELHI Question Bank With Solution For Class XII PGT (Economics) Chief Advisor Ms. Rashmi Krishnan, Director, SCERT Advisors

More information

Summary Chapter 12 Monopoly

Summary Chapter 12 Monopoly Summary Chapter 12 Monopoly Defining Monopoly - A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market - One practical measure for deciding

More information

Pure Competition urely competitive markets are used as the benchmark to evaluate market

Pure Competition urely competitive markets are used as the benchmark to evaluate market R. Larry Reynolds Pure Competition urely competitive markets are used as the benchmark to evaluate market P performance. It is generally believed that market structure influences the behavior and performance

More information

EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs:

EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: Economic Cost: the monetary value of all inputs used in a particular activity or enterprise over a given period.

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

More information

Monopoly. Key differences between a Monopoly and Perfect Competition Perfect Competition

Monopoly. Key differences between a Monopoly and Perfect Competition Perfect Competition Monopoly Monopoly is a market structure in which one form makes up the entire supply side of the market. That is, it is the polar opposite to erfect Competition we discussed earlier. How do they come about?

More information

Market Structure: Perfect Competition and Monopoly

Market Structure: Perfect Competition and Monopoly WSG8 7/7/03 4:34 PM Page 113 8 Market Structure: Perfect Competition and Monopoly OVERVIEW One of the most important decisions made by a manager is how to price the firm s product. If the firm is a profit

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)

More information

Lab 12: Perfectly Competitive Market

Lab 12: Perfectly Competitive Market Lab 12: Perfectly Competitive Market 1. Perfectly competitive market 1) three conditions that make a market perfectly competitive: a. many buyers and sellers, all of whom are small relative to market b.

More information

Integrating the Input Market and the Output Market when Teaching Introductory Economics

Integrating the Input Market and the Output Market when Teaching Introductory Economics 1 Integrating the Input Market and the Output Market when Teaching Introductory Economics May 2015 Clark G. Ross Frontis Johnston Professor of Economics Davidson College Box 7022 Davidson, NC 28035-7022

More information

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition

MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter 16 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Summary This chapter presents the traditional, idealized model of perfect competition. In it, you will

More information

ECON 600 Lecture 3: Profit Maximization Π = TR TC

ECON 600 Lecture 3: Profit Maximization Π = TR TC ECON 600 Lecture 3: Profit Maximization I. The Concept of Profit Maximization Profit is defined as total revenue minus total cost. Π = TR TC (We use Π to stand for profit because we use P for something

More information

Monopoly WHY MONOPOLIES ARISE

Monopoly WHY MONOPOLIES ARISE In this chapter, look for the answers to these questions: Why do monopolies arise? Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society s well-being?

More information

Microeconomics Topic 7: Contrast market outcomes under monopoly and competition.

Microeconomics Topic 7: Contrast market outcomes under monopoly and competition. Microeconomics Topic 7: Contrast market outcomes under monopoly and competition. Reference: N. Gregory Mankiw s rinciples of Microeconomics, 2 nd edition, Chapter 14 (p. 291-314) and Chapter 15 (p. 315-347).

More information

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination CHAPTER CHECKLIST Monopoly Chapter 13 1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly. 2. Explain how a single-price monopoly determines its

More information

N. Gregory Mankiw Principles of Economics. Chapter 14. FIRMS IN COMPETITIVE MARKETS

N. Gregory Mankiw Principles of Economics. Chapter 14. FIRMS IN COMPETITIVE MARKETS N. Gregory Mankiw Principles of Economics Chapter 14. FIRMS IN COMPETITIVE MARKETS Solutions to Problems and Applications 1. A competitive market is one in which: (1) there are many buyers and many sellers

More information

Pre-Test Chapter 22 ed17

Pre-Test Chapter 22 ed17 Pre-Test Chapter 22 ed17 Multiple Choice Questions 1. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB. 2. For a pure

More information

The Markets for the Factors of Production. Derived Demand. Our Example: Farmer Jack. Two Assumptions

The Markets for the Factors of Production. Derived Demand. Our Example: Farmer Jack. Two Assumptions 8 The Markets for the Factors of roduction R I N C I E S O F ECONOMICS F O U R T H E D I T I O N N. G R E G O R Y M A N K I In this chapter, look for the answers to these questions: hat determines a competitive

More information

At the end of Chapter 18, you should be able to answer the following:

At the end of Chapter 18, you should be able to answer the following: 1 How to Study for Chapter 18 Pure Monopoly Chapter 18 considers the opposite of perfect competition --- pure monopoly. 1. Begin by looking over the Objectives listed below. This will tell you the main

More information

MPP 801 Monopoly Kevin Wainwright Study Questions

MPP 801 Monopoly Kevin Wainwright Study Questions MPP 801 Monopoly Kevin Wainwright Study Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The marginal revenue facing a monopolist A) is

More information

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

More information

UNIVERSITY OF CALICUT MICRO ECONOMICS - II

UNIVERSITY OF CALICUT MICRO ECONOMICS - II UNIVERSITY OF CALICUT SCHOOL OF DISTANCE EDUCATION BA ECONOMICS III SEMESTER CORE COURSE (2011 Admission onwards) MICRO ECONOMICS - II QUESTION BANK 1. Which of the following industry is most closely approximates

More information

Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output.

Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry s output. Topic 8 Chapter 13 Oligopoly and Monopolistic Competition Econ 203 Topic 8 page 1 Oligopoly: How do firms behave when there are only a few competitors? These firms produce all or most of their industry

More information

PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION

PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION Professor Gregory Clark ECON 1A, Fall 2000 PROBLEM SET #6: PRODUCTION COSTS, PERFECT COMPETITION, MONOPOLY, PRICE DISCRIMINATION Notes: If the total cost function of a firm has the form TC = a + bq + cq

More information

AP Microeconomics Review

AP Microeconomics Review AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

More information

D) Marginal revenue is the rate at which total revenue changes with respect to changes in output.

D) Marginal revenue is the rate at which total revenue changes with respect to changes in output. Ch. 9 1. Which of the following is not an assumption of a perfectly competitive market? A) Fragmented industry B) Differentiated product C) Perfect information D) Equal access to resources 2. Which of

More information

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between

More information

Price Theory Lecture 6: Market Structure Perfect Competition

Price Theory Lecture 6: Market Structure Perfect Competition Price Theory Lecture 6: Market tructure Perfect Competition I. Concepts of Competition Whether a firm can be regarded as competitive depends on several factors, the most important of which are: The number

More information

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on

More information

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY

CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY CHAPTER 10 MARKET POWER: MONOPOLY AND MONOPSONY EXERCISES 3. A monopolist firm faces a demand with constant elasticity of -.0. It has a constant marginal cost of $0 per unit and sets a price to maximize

More information

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

More information

Employment and Pricing of Inputs

Employment and Pricing of Inputs Employment and Pricing of Inputs Previously we studied the factors that determine the output and price of goods. In chapters 16 and 17, we will focus on the factors that determine the employment level

More information

Revenue Structure, Objectives of a Firm and. Break-Even Analysis.

Revenue Structure, Objectives of a Firm and. Break-Even Analysis. Revenue :The income receipt by way of sale proceeds is the revenue of the firm. As with costs, we need to study concepts of total, average and marginal revenues. Each unit of output sold in the market

More information

Microeconomic FRQ s. Scoring guidelines and answers

Microeconomic FRQ s. Scoring guidelines and answers Microeconomic FRQ s 2005 1. Bestmilk, a typical profit-maximizing dairy firm, is operating in a constant-cost, perfectly competitive industry that is in long-run equilibrium. a. Draw correctly-labeled

More information

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam. , Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

More information

Chapter 6 MULTIPLE-CHOICE QUESTIONS

Chapter 6 MULTIPLE-CHOICE QUESTIONS Chapter 6 MULTIPLE-CHOICE QUETION 1. Which one of the following is generally considered a characteristic of a perfectly competitive labor market? a. A few workers of varying skills and capabilities b.

More information

Chapter 9 Profit Maximization

Chapter 9 Profit Maximization Chater 9 Profit Maximization Economic theory normally uses the rofit maximization assumtion in studying the firm just as it uses the utility maximization assumtion for the individual consumer. This aroach

More information

CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY

CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY CHAPTER 8 PROFIT MAXIMIZATION AND COMPETITIVE SUPPLY TEACHING NOTES This chapter begins by explaining what we mean by a competitive market and why it makes sense to assume that firms try to maximize profit.

More information

We will study the extreme case of perfect competition, where firms are price takers.

We will study the extreme case of perfect competition, where firms are price takers. Perfectly Competitive Markets A firm s decision about how much to produce or what price to charge depends on how competitive the market structure is. If the Cincinnati Bengals raise their ticket prices

More information

themselves to only a few, and we will explore examples along this continuum.

themselves to only a few, and we will explore examples along this continuum. CHAPTER 6 PERFECT COMPETITION, MONOPOLY AND ECONOMIC VERSUS NORMAL PROFIT CHAPTER OBJECTIVES When you have completed this chapter you will understand the distinction between perfect competition and monopoly,

More information

Labour is a factor of production, and labour, like other factors, such as capital (machinery, etc) are demanded by firms for production purposes.

Labour is a factor of production, and labour, like other factors, such as capital (machinery, etc) are demanded by firms for production purposes. Labour Demand Labour is a factor of production, and labour, like other factors, such as capital (machinery, etc) are demanded by firms for production purposes. The quantity of labour demanded depends on

More information

Perfect Competition. Perfect competition a pure market

Perfect Competition. Perfect competition a pure market We now move on to study the economics of different market structures. The spectrum of competition ranges from perfectly competitive markets where there are many sellers who are price takers to a pure monopoly

More information

Recap. What do we know about efficiency so far?

Recap. What do we know about efficiency so far? Recap What do we know about efficiency so far? Key Efficiency Definitions Recap Allocative Efficiency Productive Efficiency Static Efficiency The optimum allocation of scarce resources that best accords

More information

Student Name: Date: Teacher Name: Heather Creamer. Score:

Student Name: Date: Teacher Name: Heather Creamer. Score: Economics EOC Quiz Answer Key Microeconomic Concepts - (SSEMI1) Flow Of Goods, (SSEMI2) Law Of Demand, (SSEMI3) Economic Behavior, (SSEMI4) Organization And Role Of Business Student Name: Teacher Name:

More information

Econ 111 (04) 2nd Midterm A

Econ 111 (04) 2nd Midterm A Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)

More information

Midterm Exam #1 - Answers

Midterm Exam #1 - Answers Page 1 of 9 Midterm Exam #1 Answers Instructions: Answer all questions directly on these sheets. Points for each part of each question are indicated, and there are 1 points total. Budget your time. 1.

More information

Chapter 04 Firm Production, Cost, and Revenue

Chapter 04 Firm Production, Cost, and Revenue Chapter 04 Firm Production, Cost, and Revenue Multiple Choice Questions 1. A key assumption about the way firms behave is that they a. Minimize costs B. Maximize profit c. Maximize market share d. Maximize

More information

1 st Exam. 7. Cindy's cross-price elasticity of magazine demand with respect to the price of books is

1 st Exam. 7. Cindy's cross-price elasticity of magazine demand with respect to the price of books is 1 st Exam 1. Marginal utility measures: A) the total utility of all your consumption B) the total utility divided by the price of the good C) the increase in utility from consuming one additional unit

More information

Chapter 7 Monopoly, Oligopoly and Strategy

Chapter 7 Monopoly, Oligopoly and Strategy Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are

More information

Experiment 8: Entry and Equilibrium Dynamics

Experiment 8: Entry and Equilibrium Dynamics Experiment 8: Entry and Equilibrium Dynamics Everyone is a demander of a meal. There are approximately equal numbers of values at 24, 18, 12 and 8. These will change, due to a random development, after

More information

Chapter 15: Monopoly WHY MONOPOLIES ARISE HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS

Chapter 15: Monopoly WHY MONOPOLIES ARISE HOW MONOPOLIES MAKE PRODUCTION AND PRICING DECISIONS Chapter 15: While a competitive firm is a taker, a monopoly firm is a maker. A firm is considered a monopoly if... it is the sole seller of its product. its product does not have close substitutes. The

More information

Monopolistic Competition

Monopolistic Competition In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 12 Monopoly - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Unregulated monopolies A) cannot change the market quantity.

More information

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost. 1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

More information

Profit maximization in different market structures

Profit maximization in different market structures Profit maximization in different market structures In the cappuccino problem as well in your team project, demand is clearly downward sloping if the store wants to sell more drink, it has to lower the

More information

A2 Micro Business Economics Diagrams

A2 Micro Business Economics Diagrams A2 Micro Business Economics Diagrams Advice on drawing diagrams in the exam The right size for a diagram is ½ of a side of A4 don t make them too small if needed, move onto a new side of paper rather than

More information

AP Microeconomics 2003 Scoring Guidelines

AP Microeconomics 2003 Scoring Guidelines AP Microeconomics 2003 Scoring Guidelines The materials included in these files are intended for use by AP teachers for course and exam preparation; permission for any other use must be sought from the

More information

Economics 10: Problem Set 3 (With Answers)

Economics 10: Problem Set 3 (With Answers) Economics 1: Problem Set 3 (With Answers) 1. Assume you own a bookstore that has the following cost and revenue information for last year: - gross revenue from sales $1, - cost of inventory 4, - wages

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes

More information

An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers.

An increase in the number of students attending college. shifts to the left. An increase in the wage rate of refinery workers. 1. Which of the following would shift the demand curve for new textbooks to the right? a. A fall in the price of paper used in publishing texts. b. A fall in the price of equivalent used text books. c.

More information

AP Microeconomics Chapter 12 Outline

AP Microeconomics Chapter 12 Outline I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

More information

Econ 100B: Macroeconomic Analysis Fall Problem Set #3 ANSWERS (Due September 15-16, 2008)

Econ 100B: Macroeconomic Analysis Fall Problem Set #3 ANSWERS (Due September 15-16, 2008) Econ 100B: Macroeconomic Analysis Fall 2008 Problem Set #3 ANSWERS (Due September 15-16, 2008) A. On one side of a single sheet of paper: 1. Clearly and accurately draw and label a diagram of the Production

More information

Final Exam (Version 1) Answers

Final Exam (Version 1) Answers Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

More information

Competitive Market Equilibrium

Competitive Market Equilibrium Chapter 14 Competitive Market Equilibrium We have spent the bulk of our time up to now developing relationships between economic variables and the behavior of agents such as consumers, workers and producers.

More information

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

More information