LECTURE 4: MARKET STRUCTURES

Below are the characteristics of PERFECT COMPETITION

• price makers

• price takers

• many small firms

• low barriers

• homogeneous product

The demand curve for PERFECT COMPETITION is

• perfectly inelastic

• perfectly elastic

• elastic

• inelastic

Short run in the PERFECT COMPETITON will experience

• economic profit

• supernormal profit

• economic loss

• normal profit

Average Revenue (AR) > Average cost (AC) in the short run for PERFECT COMPETITON is

• economic profit

• supernormal profit

• economic loss

• normal profit

In the long run, the PERFECT COMPETITION market will experience

• supernormal profit

• normal profit

• economic profit

• economic loss

When there is an economic/supernormal profit in the short run for PERFECT COMPETITION, most likely

• new firms will enter the industry

• new firms will exit the industry

• nothing will happen

• I know something will happen, but doesn't know what exactly happen

What are the TWO conditions the PERFECT COMPETITON market structures need to meet to operate in the industry?

• Allocative efficiency

• Scarcity

• productive efficiency

• economic profit

Weakness in the PERFECT COMPETITION industry

• low investment

• homogenous products

• lack of innovation

• production efficiency

Benefits of PERFECT COMPETITION market structure are

• prices are kept low

• consumer power/sovereignty

• allocative & productive efficiency

• minimum AC & LRAC

Examples of PERFECT COMPETITION industries.