Market Structure: Perfect Competition

A perfectly competitive firm, operating at its optimal production level, experiences a sudden increase in its fixed costs. Assuming market price remains constant, what is the immediate impact on the firm's profit-maximizing output?

In a perfectly competitive market, several firms adopt a new technology that significantly reduces their average total cost (ATC) of production. Assuming the market demand remains constant, what is the long-run effect on market price and the number of firms in the market?

Consider a perfectly competitive industry where firms are currently earning positive economic profits. Which of the following scenarios is most likely to occur in the long run, and how will it affect the individual firm's demand curve?

A monopolist faces a demand curve given by $P = 100 - 2Q$ and has a constant marginal cost of $MC = 20$. What is the deadweight loss associated with the monopolist's production decision compared to perfect competition?

A natural monopoly experiences technological advancements that reduce its fixed costs significantly. Assuming demand remains constant and regulation is based on average cost pricing, what is the most likely immediate impact on consumer surplus?

Consider a monopolist with a cost function $C(Q) = 10Q$ and facing a demand curve $P = 50 - Q$. If the government imposes a per-unit tax of $t = 5$ on the monopolist, how will the monopolist's profit-maximizing price change?

In a monopolistically competitive market, firms differentiate their products. Which of the following strategies would be most effective for a firm seeking to sustain long-run profitability despite facing relatively elastic demand?

Consider a monopolistically competitive firm that is currently producing at a level where its marginal cost (MC) exceeds its marginal revenue (MR). Which of the following adjustments would most likely lead to an increase in the firm's profits?

An oligopolistic industry is characterized by strategic interdependence among firms. Which of the following scenarios would most likely lead to a stable collusive agreement among these firms?

In the context of game theory, what distinguishes a dominant strategy equilibrium from a Nash equilibrium in an oligopolistic market?

Consider two firms in an oligopoly facing a prisoner's dilemma situation regarding advertising. If both firms choose to advertise, they each earn a profit of $5 million. If neither firm advertises, they each earn $10 million. If one firm advertises while the other does not, the advertising firm earns $15 million, and the non-advertising firm earns $2 million. What is the Nash equilibrium in this scenario?

A firm operating in a perfectly competitive market observes that its total revenue is less than its variable costs, but greater than its total fixed costs. Assuming the firm aims to maximize profit (or minimize losses), what is the firm's optimal short-run decision?

In a perfectly competitive market characterized by constant costs, what is the long-run effect of a permanent increase in consumer demand for the product?

A monopolist faces a demand curve represented by $P = 200 - 2Q$, where $P$ is the price and $Q$ is the quantity. The monopolist's total cost function is $TC = 20Q + 100$. To maximize profit, what quantity should the monopolist produce?

A regulated natural monopoly is required to practice average cost pricing. If the firm's cost structure changes such that its average total cost curve shifts upward, what will happen to the firm's output and pricing?

A monopolistically competitive firm operates in a market with several close substitutes. If the firm successfully differentiates its product through enhanced quality and branding, what is the likely effect on the firm's price elasticity of demand and its profit margin?

In a monopolistically competitive market, firms often engage in advertising. What is the primary economic rationale for a firm to invest heavily in advertising, despite the presence of many similar products?

Two firms, A and B, operate in an oligopolistic market. If Firm A decides to drastically lower its price, what is the most likely immediate reaction from Firm B, assuming Firm B aims to maximize its own profit?

In game theory, what is the key characteristic of a 'maximin' strategy, and when is it most appropriate for a firm to employ this strategy?

Firms X and Y operate in an duopolistic market. The payoff matrix indicates that if both firms collude and restrict output, they each earn $50 million. If one firm cheats and increases output while the other adheres to the agreement, the cheating firm earns $70 million, and the other earns $20 million. If both cheat, they each earn $30 million. Which strategy embodies the prisoner's dilemma?

A firm in a perfectly competitive market suddenly discovers a technological innovation that dramatically reduces its production costs below those of all its competitors. In the short run, what is most likely to occur? But consider the long run too.

Assume a monopolist operates in a market with a demand function of $P=100-Q$ and a cost function of $TC=10Q$. If the government imposes a price ceiling of $P=55$, what output will the monopolist produce?

Assume a market transitions from perfect competition to a monopoly. How may one describe the effects of a monopoly from a social welfare perspective?

A firm in a monopolistically competitive market is making economic losses. What short run and long run adjustments could one expect this market to experience?

Two firms are duopolists in the market. If both firms decide to collude on prices, which are legal and ethical complications that could arise?

Company A and Company B decide to collude on prices. Company A decides that the agreement is non-beneficial. What is the most likely strategy that would be implemented?

Assume there is an industry with few participants. Company A uses a strategy that leads to the maximum possible profit where Company B retaliates by changing its products. What will be observed in equilibrium?

Which of the following is true of monopolistic competition?

In a perfectly competitive market, what condition ensures allocative efficiency?