Lesson 9& 10 PC

Question 1

market structure

Answer 1

the market environment within which firms operate

Question 2

perfect competition

Answer 2

a form of market structure that produces allocative and productive efficiency in long-run equilibrium

Question 3

price taker

Answer 3

a firm that must accept whatever price is set in the market as a whole

Question 4

allocative efficiency

Answer 4

achieved when consumer satisfaction is maximised. Shown on a market/industry diagram at MC=MB, or S=D, and consumer and producer surpluses are maximised. Shown on a firm diagram at P=MC.

Question 5

productive efficiency

Answer 5

attained when a firm operates at minimum average total cost, choosing an appropriate combination of inputs (cost efficiency) and producing the maximum output possible from those inputs (technical efficiency). Shown on a firm diagram at the bottom of the AC curve.

Question 6

homogeneous product

Answer 6

because products are seen as identical by consumers, there is no brand loyalty, so all products are perfect substitutes

Question 7

perfect knowledge

Answer 7

buyers and firms know prices charged by other firms, and no firm has a superior production technique