Perfect competition Learning outcomes You should be able to: Describe the assumed characteristics of perfect competition: a large number of firms; a homogeneous product‚ freedom of entry and exit (no barriers to entry or exit); perfect information and perfect resource mobility (factors of production can move easily in and out of the market) Explain‚ using a diagram‚ the shape of the perfectly competitive firm’s average revenue and marginal revenue curves‚ indicating that the assumptions of perfect
Premium Microeconomics Economics Perfect competition
1. a. What is the “average” size of the market in CMI pads given that each set of 6 CMI pads will drive 10‚000 feet? Market Size Hammers 19500 26000 Weeks used 25 25 Hours per week 30 30 Feet per hour 20 20 Feet per year 290000000 390000000 Feet Per Set (4 initially plus 2) 10000 10000 Sets per year 29000 39000 Pads per year 174000 234000 Pads Manufactured 3000 3000 % of Market 1.72% 1.28% It is estimated that there are 19‚500 to 26‚000 hammers in use 25 weeks per year or 30 hours per
Premium Generally Accepted Accounting Principles Price Gross profit margin
Chapter 11 Use the following to answer questions 1-2: Table: Barrels of Oil Barrel of Oil Produced 1 2 3 4 5 6 7 8 9 10 Total Revenue $50 100 150 200 250 300 350 400 450 500 Total Cost $4 10 21 38 61 90 126 176 266 390 Price $50 50 50 50 50 50 50 50 50 50 1. (Table: Barrels of Oil) Refer to the table. How many barrels of oil should the company produce to maximize profit? A) 6 B) 7 C) 8 D) 9 2. (Table: Barrels of Oil) Refer to the table. What is the marginal revenue of producing the fifth barrel
Premium Costs Average cost Marginal cost
Price takers are defined as “Sellers who must take the market price in order to sell their product (Gwartney‚ Stroup‚ Sobel‚ Macpherson).” The price takers production is very small compared to the total market; this allows the price takers to sell their products at the market price. However‚ they can’t sell any of their products at a higher price relative to the market price. To better explain; the text states In a price-taker market‚ the firms all produce identical products (for example‚ wheat
Premium Economics Gasoline Cost
Questions for Critical Thinking 1 Liberty University Business 620/ Global Economic Environment Salvatore’s Chapter 1: Discussion Question 9. How is the concept of a normal return on investment related to the distinction between business and economic profit? There is no normal return on investment. To be considered a return on investment‚ the internal rate of return should exceed the cost of capital. A low risk‚ ongoing enterprise might be satisfied with an IRR= 7-10%‚ while a
Premium Economics Costs Marginal cost
Chapter 4: Costs and Cost Minimization Multiple Choice 1. Suppose you are a star basketball player at a major university in your sophomore year. You are sought after by several NBA teams. Which of the following choices best characterizes your opportunity cost if you choose to drop out of college and enter the NBA? a) The value of your college scholarship that you have given up. b) The skills that two more years of playing at your college would have given you along with their additional value
Premium Costs Economics Microeconomics
1. What is a barter system? A barter system is a trade of goods or services for other goods or services. No money is involved. This allowed people to get rid of what they don’t need so they can obtain what they do need. 2. What is the principle of supply and demand? The principle of supply and demand is that the price of goods and services will depend on the supply and demand. If there’s a high demand for a certain good but a low supply‚ the price of the goods will rise. 3. What are tariffs? How
Premium Supply and demand Economics Microeconomics
Barriers to entry: In theories of competition in economics‚ barriers to entry are the obstacles and hindrances that make it difficult for a company to enter a given market or industry. The most common barriers to entry include government regulation and economies of scale‚ but nowadays it is increasing for entry barriers to be viewed as a cost. Stigler defined barriers to entry as “A cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already
Premium Economics Supply and demand Microeconomics
Major Assignment 1) a) Demand Function: Quantity Demanded (Qd) = a + b* Price (P) Supply Function: Quantity Supplied (Qs) = a + b* Price (P) Where: a = constant b = the change in quantity as a result to the change in price. Demand Function: Quantity Demanded (Qd) = a + b* Price (P) b = (420 – 350) / (20 – 25) = 70 / -5 = -14 Using: P = 25‚ Qd = 350 350 = a – 14 * (25) 350 = a – 350 Therefore a = 700 and the demand function would be: Qd = 700 – 14 * P Supply Function:
Premium Costs Supply and demand Variable cost
Business Economics 2012 Table of Contents Q1) Explain (using example) the law of diminishing marginal productivity (DMP). Also‚ explain the difference between the law of DMP and law of returns to scale............................................................. 3 Q2) Explain how profit maximizing output is determined in a .............................................................. 9 a) Perfect competitive market ........................................................................
Premium Economics Microeconomics