Figure ) In figure 11.1, the firms total profit is equal to A) 180. B) 45. C) 225. D) MR - MC.

Size: px
Start display at page:

Download "Figure ) In figure 11.1, the firms total profit is equal to A) 180. B) 45. C) 225. D) MR - MC."

Transcription

1 Topic 6 test MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In a perfectly competitive market, the profit maximizing firm will A) never set its price equal to its marginal revenue. B) always produce so that marginal revenue equals marginal cost. C) always produce so that price equals average cost. D) always earn profits. 2) By assuming that each firm sells an identical product, the model of perfect competition assumes that A) each firm's output is a perfect substitute for the output of any other firm. B) each firm can expect to earn some economic profit. C) the demand for each firm's product is perfectly inelastic. D) each firm will try to cut prices to increase its market share. 3) In a perfectly competitive market in the short run, as market demand increases, A) the perfectly competitive firm decreases output and profits will typically decrease. B) the perfectly competitive firm decreases output and profits will typically increase. C) the perfectly competitive firm increases output and profits will typically fall. D) the perfectly competitive firm increases output and profits will typically increase. Figure ) In figure 11.1, the firms total profit is equal to A) 180. B) 45. C) 225. D) MR - MC. 5) In a perfectly competitive market, the demand for a single firm's product is perfectly elastic A) only in the long-run. B) because this firm's output is a perfect substitute for any other firm's output. C) because this firm is a price taker. D) because there are many buyers in this market. 6) Which of the following would be closest to being a perfectly competitive firm A) an Australian car producer. B) an Australian wheat farmer. C) a big city newspaper. D) a pay TV company. 7) Which of the following is NOT an assumption of perfectly competitive markets? A) unrestricted entry B) complete information about prices C) new entrants have higher costs D) many buyers and many sellers 8) A perfectly competitive firm maximizes profits by 1

2 A) setting the right price. B) manipulating demand. C) cutting wages. D) choosing the right level of output. 9) If a firm's accounting profit is negative, it A) cannot be earning an economic profit. B) could not possibly be a profit maximizer. C) is earning zero economic profit. D) can still be earning an economic profit. Figure ) Figure 11.2 show the cost curves for a perfectly competitive firm. If price equals $20, which of the following statements is TRUE? A) Over time, firms will leave this industry. B) Over time, market price will fall. C) The firm is earning zero economic profit. D) The industry is in long run equilibrium. SHORT ANSWER. Write the word or phrase that best completes each statement or answers th e question. 11) Why is the demand for the perfect competitor's product perfectly elastic even though the market demand is not? 12) What is a normal profit? 13) List the three conditions for resources to be used efficiently. 14) Define the shutdown point. Explain why the firm shuts down in the short run if price falls below this point. 15) What are the four assumptions of perfect competition? TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 16) In long-run equilibrium, perfectly competitive firms cannot earn economic profit. 17) Perfectly competitive firms will sometimes operate even though they incur an economic loss in the short run. 18) Entry of new firms into a perfectly competitive market raises the product's price. 2

3 19) In perfectly competitive markets, many firms sell an identical product. 20) A profit maximizing perfectly competitive firm will set price equal to marginal cost. 3

4 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) B 2) A 3) D 4) B 5) B 6) B 7) C 8) D 9) A 10) B SHORT ANSWER. Write the word or phrase that best completes each statement or answers th e question. 11) Each firm takes the market price as given. Because each firm's product can be perfectly substituted with any other firm's product, consumers will only pay the market price. Hence, any deviation above the market price causes the firm's sales to plunge to zero and any deviation below causes the firm's sales to soar to the entire amount sold in the market. 12) : A normal profit is the return a firm's owner could obtain in the best alternative business. As a result, it is an opportunity cost to the firm. 13) The three conditions for efficiency are: producer efficiency; consumer efficiency; and exchange efficiency. 14) The shutdown point is the point at which the price equals minimum average variable cost. If the price were to fall further, the firm would not even cover variable costs. Its loss would exceed the loss of just shutting down. 15) The four assumptions are: many firms selling an identical product; many buyers; no restrictions on entry into the industry; and complete information about prices of each firm's product. TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 16) TRUE 17) TRUE 18) FALSE 19) TRUE 4

5 20) TRUE 5

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Module 2 Lecture 5 Topics

Module 2 Lecture 5 Topics Module 2 Lecture 5 Topics 2.13 Recap of Relevant Concepts 2.13.1 Social Welfare 2.13.2 Demand Curves 2.14 Elasticity of Demand 2.14.1 Perfectly Inelastic 2.14.2 Perfectly Elastic 2.15 Production & Cost

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

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

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 Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is

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

Introduction to Agricultural Economics

Introduction to Agricultural Economics Introduction to Agricultural Economics Economics examines: how scarce resources are allocated. how firms maximize profits. how market competition affects firms and consumers. the limitations of markets.

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

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

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

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

Monopoly and Monopsony Labor Market Behavior

Monopoly and Monopsony Labor Market Behavior Monopoly and Monopsony abor Market Behavior 1 Introduction For the purposes of this handout, let s assume that firms operate in just two markets: the market for their product where they are a seller) and

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

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

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

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

MFP SET. Lecture 3 Surplus: Consumer & producer Elasticity & its applications MFP SET 2000 1

MFP SET. Lecture 3 Surplus: Consumer & producer Elasticity & its applications MFP SET 2000 1 MFP SET Lecture 3 Surplus: Consumer & producer Elasticity & its applications MFP SET 1 Consumer surplus! Willingness to pay: the maximum amount that a consumer will pay for a good! Consumer surplus: the

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

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

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

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

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

Demand, Supply and Elasticity

Demand, Supply and Elasticity Demand, Supply and Elasticity CHAPTER 2 OUTLINE 2.1 Demand and Supply Definitions, Determinants and Disturbances 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities of Supply and

More information

Economics 100 Exam 2

Economics 100 Exam 2 Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

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) A major characteristic of monopoly is A) a single seller of a product. B) multiple sellers of a product. C) two sellers of a product. D) a few sellers

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

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

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. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If a producing firm does not have enough time to expand its plant capacity, it is: A)

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

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

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

LABOR UNIONS. Appendix. Key Concepts

LABOR UNIONS. Appendix. Key Concepts Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of

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

N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY

N. Gregory Mankiw Principles of Economics. Chapter 15. MONOPOLY N. Gregory Mankiw Principles of Economics Chapter 15. MONOPOLY Solutions to Problems and Applications 1. The following table shows revenue, costs, and profits, where quantities are in thousands, and total

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

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!!

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications

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

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

SUPPLY AND DEMAND : HOW MARKETS WORK

SUPPLY AND DEMAND : HOW MARKETS WORK SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern

More information

1. Supply and demand are the most important concepts in economics.

1. Supply and demand are the most important concepts in economics. Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Market is a group of buyers and sellers of a particular good or service. P. 66. b. These individuals

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

BASIC MARKET ELEMENTS. Supply Demand Price Competition

BASIC MARKET ELEMENTS. Supply Demand Price Competition BASIC MARKET ELEMENTS Supply Demand Price Competition Supply Supply is the quantity of goods that firms are willing to produce and sale with respect to the market price when all other conditions (like

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

CASE FAIR OSTER PEARSON

CASE FAIR OSTER PEARSON CASE FAIR OSTER PEARSON Publishing as Prentice Hall PRINCIPLES OF MICROECONOMICS E L E V E N T H E D I T I O N Prepared by: Fernando Quijano w/shelly Tefft 2of 35 Input Demand: The Labor and Land Markets

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

2. The total market supply is the sum of the amount supplied by each individual firm

2. The total market supply is the sum of the amount supplied by each individual firm Review The supply function: 1. The individual firm s supply is calculated in two steps: First, we figure out whether the firm produces or shuts down, is the price greater than the shutdown price? Second,

More information

Managerial Economics. 1 is the application of Economic theory to managerial practice.

Managerial Economics. 1 is the application of Economic theory to managerial practice. Managerial Economics 1 is the application of Economic theory to managerial practice. 1. Economic Management 2. Managerial Economics 3. Economic Practice 4. Managerial Theory 2 Managerial Economics relates

More information

Principle of Microeconomics Econ 202-506 chapter 13

Principle of Microeconomics Econ 202-506 chapter 13 Principle of Microeconomics Econ 202-506 chapter 13 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The WaveHouse on Mission Beach in San Diego

More information

Elasticity and Its Application

Elasticity and Its Application Elasticity and Its Application Chapter 5 All rights reserved. Copyright 2001 by Harcourt, Inc. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,

More information

Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Econ 101: Principles of Microeconomics Chapter 16 - Monopolistic Competition and Product Differentiation Fall 2010 Herriges (ISU) Ch. 16 Monopolistic Competition Fall 2010 1 / 18 Outline 1 What is Monopolistic

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. MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The four-firm concentration ratio equals the percentage of the value of accounted for by the four

More information

(P 2 P 1 )/[(P 1 + P 2 )/2]. It shows how flexible sellers are to a change in price.

(P 2 P 1 )/[(P 1 + P 2 )/2]. It shows how flexible sellers are to a change in price. September 15, 2008 Elasticity of supply The price elasticity of supply measures how quantity offered of a good responds to a change in the good s price. It is defined the same as price elasticity of demand,

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

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

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

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

OVERVIEW. 2. If demand is vertical, demand is perfectly inelastic. Every change in price brings no change in quantity.

OVERVIEW. 2. If demand is vertical, demand is perfectly inelastic. Every change in price brings no change in quantity. 7 PRICE ELASTICITY OVERVIEW 1. The elasticity of demand measures the responsiveness of 1 the buyer to a change in price. The coefficient of price elasticity is the percentage change in quantity divided

More information

OVERVIEW. 7. In perfectly competitive markets, wages are determined by supply and demand.

OVERVIEW. 7. In perfectly competitive markets, wages are determined by supply and demand. 15 DEMAND FOR INPUTS OVERVIEW 1. Each firm is involved in two markets, a market for its output and a market for inputs. Decisions the firm makes in one market affect its decisions in the other market.

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

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost

國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 國 立 高 雄 第 一 科 技 大 學 管 理 學 院 暨 財 金 學 院 1 0 3 學 年 度 第 1 學 期 經 濟 學 期 末 會 考 題 目 卷 ( A ) I. Production and Cost 1. The short run is the time frame A. during which the quantities of all resources are fixed.

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

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

DEMAND AND SUPPLY IN FACTOR MARKETS

DEMAND AND SUPPLY IN FACTOR MARKETS Chapter 14 DEMAND AND SUPPLY IN FACTOR MARKETS Key Concepts Prices and Incomes in Competitive Factor Markets Factors of production (labor, capital, land, and entrepreneurship) are used to produce output.

More information

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch Ch. 6 Lecture Notes I. Price Elasticity of Demand A. Law of demand tells us that consumers will respond to a price decrease by buying more of a product (other things remaining constant), but it does not

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

PROBLEM SET#3 PART I: MULTIPLE CHOICE

PROBLEM SET#3 PART I: MULTIPLE CHOICE 1 PROBLEM SET#3 PART I: MULTIPLE CHOICE 1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive.

More information

or, put slightly differently, the profit maximizing condition is for marginal revenue to equal marginal cost:

or, put slightly differently, the profit maximizing condition is for marginal revenue to equal marginal cost: Chapter 9 Lecture Notes 1 Economics 35: Intermediate Microeconomics Notes and Sample Questions Chapter 9: Profit Maximization Profit Maximization The basic assumption here is that firms are profit maximizing.

More information

Chapter 5 Applications of Supply and Demand

Chapter 5 Applications of Supply and Demand 1. Elasticity of Demand (E d ) Chapter 5 Applications of Supply and Demand Measures the responsiveness of Q d to a change in price. How much does Q d change (%) when P changes (%)? We can use a formula

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. Economics 103 Spring 2012: Multiple choice review questions for final exam. Exam will cover chapters on perfect competition, monopoly, monopolistic competition and oligopoly up to the Nash equilibrium

More information

Pre-Test Chapter 18 ed17

Pre-Test Chapter 18 ed17 Pre-Test Chapter 18 ed17 Multiple Choice Questions 1. (Consider This) Elastic demand is analogous to a and inelastic demand to a. A. normal wrench; socket wrench B. Ace bandage; firm rubber tie-down C.

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

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

AP Microeconomics. Practice Exam. Advanced Placement Program

AP Microeconomics. Practice Exam. Advanced Placement Program Advanced Placement Program AP Microeconomics Practice Exam The questions contained in this AP Microeconomics Practice Exam are written to the content specifications of AP Exams for this subject. Taking

More information

Chapter 4: Elasticity. McTaggart, Findlay, Parkin: Microeconomics 2007 Pearson Education Australia

Chapter 4: Elasticity. McTaggart, Findlay, Parkin: Microeconomics 2007 Pearson Education Australia Chapter 4: Elasticity Objectives After studying this chapter, you will be able to: Define, calculate, and explain the factors that influence the price elasticity of demand Define, calculate, and explain

More information

Taxation-Incidence (Chapter 19)

Taxation-Incidence (Chapter 19) (Chapter 19) Who bears the burden of a tax? Is it the party that sends the check to the government? Not necessarily. Three rules of tax incidence The statutory burden of a tax does not describe who really

More information

Managerial Economics

Managerial Economics Managerial Economics Unit 3: Perfect Competition, Monopoly and Monopolistic Competition Rudolf Winter-Ebmer Johannes Kepler University Linz Winter Term 2012 Winter-Ebmer, Managerial Economics: Unit 3 1

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