Perfectly Competitive Market

Question 1

Perfectly Competetive Market

Answer 1

A market that meets the conditions of 1. many seelers and buyers, 2 all firms selling identical products an, 3 no barriers to entry.

Question 2

How does a perfectly competitive firm maximize Profit?

Answer 2

To maximize profit a firm has to produce a quantity where the difference between total revenue and total cost is as large as possible.

Question 3

How do you identify Profit on the Cost Curve Graph?

Answer 3

Price is greater than Average Total Cost (P>ATC)

Question 4

How do you identify loss on the Cost Curve Graph?

Answer 4

Price is lower that the Average Total Cost(P

Question 5

How do you identify if a firm is breaking even on the Total Cost Curve

Answer 5

Price is equal to Average Total Cost (P=ATC)

Question 6

How does a firm make the decision to Produce or shutdown in the Short run?

Answer 6

A firm will shutdown if it’s Total Revenue is less than it’s Variable cost and produce as long as Total Revenue is greater than or equal to Variable Cost.

Question 7

Why would a new firm join the market?

Answer 7

Firms will continue to join the market until economic profit is eliminated.

Question 8

Productive efficiency

Answer 8

A situation where a good or service is produced at the lowest possible cost.

Question 9

What does perfect competition result in?

Answer 9

Perfect competition results in productive efficiency.