Managerial Economics Chapter 9
CHAPTER 9
Three conditions for a market to be perfectly competitive?
Many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
In perfectly competitive markets, prices are determined by
The interaction of market demand and supply because firms and consumers are price takers.
Price taker
Buyer or seller that is unable to affect the market price.
A buyer or seller that takes the market price as given
When are firms likely to be price takers?
A firm is likely to be a price taker when….. it sells a product that is exactly the same as every other firm. It represents a small fraction of the total market.
Consumers are usually price takers when they buy most goods and services because ____, while relatively few firms are price takers because ____.
Their individual purchases are small relative to the market; their individual output is large relative to the market.
Explain why it is true that for a firm in a perfectly competitive market that P=MR=AR
In a perfectly competitive market, P=MR=AR because
Firms can sell as much output as they want at the market price.
Which of the following statement is true when the difference between TR and TC is at its maximum positive value?
MR=MC AND Slope of TR= Slope of TC
When maximizing profits, MR = MC is equivalent to P = MC because
The marginal revenue curve for a perfectly competitive firm is the same as its demand curve.
Perfectly competitive firms should produce the quantity where
The difference between total revenue and total cost is as large as possible.
Profit for a perfectly competitive firm can be expressed as
(P-ATC) x Q , where P is price, Q is output, and ATC is average total cost.
A student argues: “To maximize profit, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than this quantity, then the profit made on each additional unit
Three conditions for a market to be perfectly competitive?
Many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
In perfectly competitive markets, prices are determined by
The interaction of market demand and supply because firms and consumers are price takers.
Price taker
Buyer or seller that is unable to affect the market price.
A buyer or seller that takes the market price as given
When are firms likely to be price takers?
A firm is likely to be a price taker when….. it sells a product that is exactly the same as every other firm. It represents a small fraction of the total market.
Consumers are usually price takers when they buy most goods and services because ____, while relatively few firms are price takers because ____.
Their individual purchases are small relative to the market; their individual output is large relative to the market.
Explain why it is true that for a firm in a perfectly competitive market that P=MR=AR
In a perfectly competitive market, P=MR=AR because
Firms can sell as much output as they want at the market price.
Which of the following statement is true when the difference between TR and TC is at its maximum positive value?
MR=MC AND Slope of TR= Slope of TC
When maximizing profits, MR = MC is equivalent to P = MC because
The marginal revenue curve for a perfectly competitive firm is the same as its demand curve.
Perfectly competitive firms should produce the quantity where
The difference between total revenue and total cost is as large as possible.
Profit for a perfectly competitive firm can be expressed as
(P-ATC) x Q , where P is price, Q is output, and ATC is average total cost.
A student argues: “To maximize profit, a firm should produce the quantity where the difference between marginal revenue and marginal cost is the greatest. If a firm produces more than this quantity, then the profit made on each additional unit