What are the underlying assumptions of perfect competition?
Question
Review 5
1. What are the underlying assumptions of perfect competition?
2. Why is the demand curve of a firm in a perfectly competitive market horizontal?
3. In a perfectly competitive market, where does the firm maximize its profit?
4. True or False? Firms in perfectly competitive markets earn zero accounting profits in the long run.
5. In a perfectly competitive market, who or what sets prices?
Using the following graph, answer questions 6 and 7 (0.5 points per answer).
6. What will the firm do in the short run if the price is:
a. $14?
b. $10?
c. $7?
7. What will the firm do in the long run if the price is:
a. $14?
b. $10?
c. $7?
8. Fill in the following table and answer the following questions. (table = 5 points)
Y  FC ($)  VC ($)  TC ($)  AFC ($)  AVC ($)  ATC ($)  MC ($) 
Output  Fixed Cost  Variable Cost  Total Cost  Average Fixed Cost  Average Variable Cost  Average Total Cost  Marginal Cost 
1  20  10  
2  20  15  
3  20  18  
4  20  22  
5  20  28  
6  20  39  
7  20  56 
Assume that price is $15.
a. Calculate total profit.
9. Complete the following table (2 points).
Y  P ($)  TR ($)  MR ($) 
Output  Price  Total Revenue  Marginal Revenue 
1  4  
2  4  
3  4  
4  4  
5  4  
6  4  
7  4 
Use the following graph and answer questions 10 13.
10. Using the graph above, how much is output?
11. Using the graph above, how much is total profit?
12. Using the graph above, how much is the most efficient output?
13. Using the graph above, what is the firm’s price in the long run?
Review 6
1. Using the graph above, calculate the firm’s profit or loss.
2. Using the graph above, if this firm were a perfect competitor, what is the lowest price it would accept in the long run?
3. Using the graph above, is the firm a perfect competitor? Explain how you came to your answer.
4. (6 points) Complete the following table.
Y  P ($)  TR ($)  MR ($)  TC ($)  ATC ($)  MC ($) 
Output  Price  Total Revenue  Marginal Revenue  Total Cost  Average Total Cost  Marginal Cost 
1  33  30  
2  31  45  
3  29  55  
4  27  61  
5  25  66  
6  23  72  
7  21  81  
8  19  96 
5. Using the table above, calculate the firm’s total profit or loss.
6. (4.5 points) Label the following in the graph below: Marginal Cost Curve, Marginal Revenue Curve, Demand Curve, Deadweight loss, Lost Consumer Surplus, Price in Perfect Competition, Monopolist Price, Monopolist Quantity, and Perfect Competition Quantity.
PRICE
OUTPUT
7. What is deadweight loss?
8. (3.5 points) What are the barriers to entry?
9. What is the distinguishing characteristic of imperfect competition?
Review 7
1. (2 points) Using the graph above, calculate the profit (P – ATC * Output).
a. Is this monopolistically competitive firm in the short run or long run?
b. If the firm were a perfect comeptitor in the long run, what would be the lowest price it would accept?
2. (3 points) What are the main characteristics of monopolistic competition?
3. True or False? Firms competing in a monopolistically competitive market earn zero economic profits in the long run.
4. True or False? Monopolistically competitive firms face relatively inelastic demand curves.
5. (2 points) What is product differentiation? Why is it important to firms?
6. What is the one feature that distinguishes perfect competition from monopolistic competition?
7. (3 points) Name three products that face a monopolistically competitive market.
8. What is price discrimination?
9. (3 points) Give three examples of price discrimination.
10. Why is perfect competition better than monopolistic competition?
Review 8
1. What are two examples of oligopolistic industries?
2. True or False? Firms in oligopolies are interdependent upon one another.
3. Does an oligopoly charge a price indicative of monopolistic competition or perfect competition?
4. (2 points) Why does an oligopolist engaged in cutthroat competition have a kinked demand curve?
5. (2 points) A monopoly would have a concentration ratio of __________________ and a HerfindahlHirschman index of ___________________.
6. Which statement is true?
a. The higher the HHI, the higher the degree of concentration.
b. The lower the HHI, the higher the degree of concentration.
c. The HHI remains constant as the degree of concentration rises.
d. There is no relationship between the HHI and the degree of concentration.
7. (2 points) The kinked demand curve is associated with:
a. sticky prices
b. OPEC
c. covert collusion
d. none of the above
8. (2 points) Use the following table to calculate the concentration ratio and the HerfindahlHirschman Index.
Firm  Market Share % 
A  20 
B  20 
C  15 
D  10 
E  10 
F  5 
G  5 
H  5 
I  5 
J  5 
Total  100% 
9.  (2 points) In the game shown below, firms 1 and 2 must independently decide whether to charge high or low prices.
Which of the following are Nash equilibrium payoffs?

Originally posted 20160718 09:40:04. Republished by Blog Post Promoter