Perfect competition

Question 1

Perfect competition:
# of firms in industry:
standard product or differentiated:
nonprice comp?:
easy/difficult to enter market?:
who sets the price of the good?:

Answer 1

• many small firms
• identical products (perfect substitutes)
• easy for firms to enter and exit
• seller has no need for nonprice comp/ advertising
• firms are price takers (take price set by market)

Question 2

demand curve is….?

Answer 2

perfectly elastic

Question 3

is it MRDARP or MR and DARP are separate?

Answer 3

MRDARP

Question 4

remember!!! MR=…

Answer 4

MC

Question 5

when does perfect comp have a profit?
breaking even?
incurring a loss but still working?
incurring a loss and shutting down?

Answer 5

when P

Question 6

when is the profit maximizing point?

Answer 6

when MR=MC

• applies for all market structures
• only if price is above AVC

Question 7

what is an example of increasing return to scale?

Answer 7

you doubled your workers, so your output is more than doubled

Question 8

what is constant returns to scale?

Answer 8

you doubled your workers and you get exactly doubled

Question 9

what is decreasing return to scale?

Answer 9

you double your workers, so your output is less than doubled