The Firm and Market Structures

Question 1

Perfect Competition?
-Number of firms and their relative sizes?
-Degree to which firms differentiate their products?
-Bargaining power of firms with respect to pricing?
-Barriers to entry into or exit from the industry?
-Degree to which firms compete on factors other than price?

Answer 1

-Many Firms
-Very Low
-Very good substitutes
-Price Only
-None

Question 2

What is the demand curve for perfect competition?

Answer 2

Question 3

What are perfect competition characteristics?

Answer 3

-Homogenous product
-Large number of independent firms; each small relative to total market.
-Perfectly elastic demand curve (firms)
-Supply and demand determine market price
-No barriers to entry or exit

Question 4

What does short-run profit maximization look like?

Answer 4

Question 5

What does the demand curve equal?

Answer 5

P=Demand=Marginal Revenue=Average Revenue