Perfect Competition

Question 1

the difference between total revenue and total cost

Answer 1

profit

Question 2

the ____ motive encourages firms to produce the goods and services that consumers desire, at prices they are willing to pay

Answer 2

profit

Question 3

the number and relative size of firms in an industry

Answer 3

market structure

Question 4

the ____ range from monopoly at one extreme to perfect competition at the other extreme. Most real-world firms are along the continuum of imperfection competition

Answer 4

market structure

Question 5

a market in which no buyer or seller has market power

Answer 5

perfect competition

Question 6

many firms, a little market power

Answer 6

monopolistic competition

Question 7

a few firms, considerable market power

Answer 7

oligopoly

Question 8

two firms

Answer 8

duopoly

Question 9

one firm only

Answer 9

monopoly

Question 10

a large number of buyers and sellers with identical products and easy entry and exit by new or existing firms

Answer 10

pure competition

Question 11

large number of sellers

Answer 11

no single seller has impact on price alone each seller supplies negligible amount of total supply —- price constant

Question 12

standardized product

Answer 12

product identical to competitor no reason for non-price competition

Question 13

price taker

Answer 13

individual firms must accept and adjust to market price —- output is irrelevant

Question 14

Price takers

Answer 14

react to prices in the market — do not influence prices

Market price determined by demand and supply in competitive market

Question 15

freedom of entry exit

Answer 15

no significant obstacles preventing firms from entering or leaving industry

Question 16

complete information to all

Answer 16

one of the characteristics

Question 17

no economic profits

Answer 17

one of the characteristics

Question 18

there are no pricing decisions. Firms take the market price

Answer 18

(price takers)

Question 19

there are no quality decisions since all products are identical

Answer 19

the only decision left is how much to produce— which is the production decision

Question 20

only way a firm can influence revenues is by varying the amount it produces

Answer 20

product revenues

Question 21

____ revenue is equal to price, the added amount recieved from selling one more unit

Answer 21

marginal revenue

Question 22

MR=

Answer 22

change in total revenue / change in output

Question 23

constant to individual firm because each seller supplies negligible fraction of total supply

Answer 23

product price

Question 24

MR = P

Answer 24

because P is constant

Question 25

produce at that rate of output where marginal revenue MR=P equals marginal cost MC

Answer 25

profit maximization rule