12 Questions
What point do perfectly competitive firms produce at in the long run?
P=MC
What does monopoly power refer to?
Extent to which a firm can raise prices without losing customers
What defines a monopoly in terms of market structure?
Single producer in the market
Under monopoly, when does a firm earn profit?
When MR=MC
How does the demand curve differ between perfect competition and monopoly?
Perfect competition has an upward sloping demand curve, while monopoly has a downward sloping demand curve
Why can a monopolist make supernormal profits even in the long run?
Due to no easy entry for other firms
What happens to prices in the long run if firms are making losses in the short run?
Prices decrease due to an increase in supply caused by more firms leaving the industry.
What is the optimal point of production for any society according to the text?
Where price is equal to marginal cost
Why do perfectly competitive firms in the long run only earn normal profits?
Because more firms entering the market eliminate supernormal profit possibilities.
How is productive efficiency achieved according to the text?
By producing at the bottom of their AC curves.
What happens to prices in the long run if there are supernormal profits in the short run?
Prices fall as supply increases with more firms attracted to the market.
What factor contributes to eliminating supernormal profit possibilities in a perfectly competitive market in the long run?
More firms being attracted to the market due to losses
Learn about profit maximization in the long run under perfect competition where all factors of production are variable and firms can enter or leave the industry. Understand how supernormal profits in the short run attract more firms leading to price decreases in the long run.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
