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AP Economics > Pure Competition Quiz > Flashcards

Pure Competition Quiz Flashcards

1
Q

What type of product is in a purely competitive market?

A

Standardized (perfect subs)

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2
Q

In a purely competitive market, is there any ability to set price?

A

No, market determines price and the seller is the price taker

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3
Q

Is there any product differentiation in a purely competitive market?

A

No. Products are identical

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4
Q

What is the ease of entry in a purely competitive market?

A

Relatively easy to start a new business

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5
Q

Are there any non-price competition (advertisements, warranties) in a purely competitive market?

A

No

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6
Q

Is there allocative/ productive efficiency in a purely competitive market?

A

Yes

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7
Q

Are there any long run profits in a purely competitive market?

A

No

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8
Q

What are some examples of a purely competitive market?

A
  • agriculture
  • stock market
  • currency exchanges
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9
Q

The demand curve of the individual firm is

A

Perfectly elastic

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10
Q

Why does P=MR?

A

Because each additional sale brings the price as revenue- never more, never less

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11
Q

What is normal profit?

A

The minimum income that the entrepreneur must receive to continue

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12
Q

What are the 3 characteristics of the MR=MC rule?

A
  1. Firm will choose to produce rather than to shut down
  2. Profit maximizing rule for all firms
  3. PC firms can sell as much or as little as they choose
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13
Q

Firms maximize their profits where?

A

Where MR=MC

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14
Q

How do you find the loss or profit?

A

Price- ATC • quantity

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15
Q

MC intersects AVC and ATC where?

A

At lowest points

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16
Q

MC comes from where?

A

TC not ATC

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17
Q

How long will the firm choose to produce at a loss?

A

As long as it covers its variable costs and at least some of its fixed costs

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18
Q

What does it mean when the ATC curve is above the AVC curve?

A

Producing at a loss

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19
Q

What happens if the price is below AVC?

A

Shut down

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20
Q

In the marginal cost and SR supply curve, what is the MR curve?

A

The demand curve

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21
Q

In the marginal cost and SR supply curve what is the MC curve above shutdown point?

A

The supply curve

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22
Q

If the MR=MC point is exactly at the shutdown point, what happens?

A

The company still produces

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23
Q

What are the determinants that cause the supply curve to shift?

A
  • cost of resources
  • # of firms
  • advances in technology
  • government regulation
  • taxes
  • price expectations
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24
Q

What is market price determined by?

A

Demand and supply

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25
Q

What are the three assumptions of profit maximization in the long run?

A
  • only adjustment in this analysis is the entry and exit of new firms
  • all firms have identical cost curves
  • industry is constant (entry and exit will not affect resource prices)
26
Q

Socially optimal production=?

A

Allocative efficiency

27
Q

Allocative efficiency?

A

Using resources deemed by society as most optimal means of production

28
Q

Productive efficiency?

A

Production of goods in least costly way

29
Q

In the long run, after all changes in the market, what happens?

A

Long run equilibrium is established

30
Q

In the long run?

A

A purely competitive firm wants only normal profit

31
Q

In a purely competitive market, what is the number of firms?

A

Very large number of firms (many many)

32
Q

In a monopolistic competitive market, how many firms are there?

A

Large number of firms (many)

33
Q

What type of product is in a monopolistic competition?

A

Differentiated (similar)

34
Q

What is the ability to set price in a monopolistic competitive market?

A

Some

35
Q

Product differentiation in a monopolistic competitive market?

A

Varies depending on the industry

36
Q

Ease of entry in a monopolistic competitive market?

A

Relatively easy to start a new business

37
Q

Examples in monopolistic competitive market?

A

Fast food

Retail

38
Q

Barriers to exit/entry in monopolistic competitive market?

A

None

39
Q

Non price competition in monopolistic competitive market?

A

Heavily advertised

40
Q

Allocative/productive efficiency in monopolistic competitive market?

A

No

41
Q

Long run profits in monopolistic competitive market?

A

None

42
Q

Number of firms in oligopoly?

A

A few (3-5)

43
Q

Type of product in oligopoly?

A

Standardized or differentiated

44
Q

Ability to set price in oligopoly?

A

Mutual interdependence

45
Q

Product differentiation in oligopoly?

A

Varies. Some industries may be identical, others may be differentiated

46
Q

Ease of entry in oligopoly?

A

Difficult. High start up costs

47
Q

Examples of oligopoly?

A

Auto industry
Cell phones
Cereals

48
Q

Barriers to exit/entry in oligopoly?

A

Extensive

49
Q

Non-price competition in oligopoly?

A

Heavily advertised

50
Q

Allocative/productive efficiency in oligopoly?

A

No

51
Q

Long run profits in oligopoly?

A

Yes

52
Q

Number of firms in pure monopoly?

A

Single producer

53
Q

Type of product in pure monopoly?

A

Unique, no substitution

54
Q

Ability to set price in pure monopoly?

A

Most. Seller is only source of product and can act like price maker

55
Q

Product differentiation in pure monopoly?

A

None. Product is unique

56
Q

Ease of entry in pure monopoly?

A

Very difficult. Significant barriers to entry

57
Q

Examples of pure monopoly?

A

NFL

Gulf Power

58
Q

Barriers to exit/entry in pure monopoly?

A

Extensive

59
Q

Non price competition in pure monopoly?

A

Yes

60
Q

Allocative/productive efficiency in pure monopoly?

A

No

61
Q

Long run profits in pure monopoly?

A

Yes

AP Economics (19 decks)

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