Lecture 7: Competitive Firms and Markets (updated)

_________ is a market structure in which buyers and sellers are
price takers.

• Perfect competition

• Monopoly

• Monoposlistic Competition

• Oligopoly

___________ curve is the horizontal sum of the supply curves of
the individual firms.

• Industry supply curve

• Total Supply Curve

• Market Supply Curve

A price ceiling ______ than the equilibrium price makes the producers
produce less than the equilibrium quantity.
A price floor ________ than the equilibrium price makes the consumers
demand less than the equilibrium quantity.

• higher, lower

• lower, higher

Profit-Maximization requires

• MR>MC

• MR=MC

• MR<MC

In-between the SR and the LR, firms enter the market if they can
make economic profit.

• True

• False

In the long run, there’s no fixed cost for a firm. Hence:

• LRAC = LRVC

• LRAC = FC

• LRAC = 0

Suppose the market demand is Qd = 10 − p and market supply is Qs = p.
What is the equilibrium quantity and price and the consumer surplus and
producer surplus?

• Q = 1, P = 1; CS = PS = 2

• Q = 6, P = 5; CS = PS = 14

• Q = 5, P = 5; CS = PS = 12.5

Suppose the market demand is Qd = 10 − p and market supply is Qs = p.
Suppose the government creates a price ceiling of
p = 3, what’s the resulting equilibrium quantity? What are the CS and
PS? What is the deadweight loss?

• Q = 3, CS = 18, PS = 3; DWL = 5

• Q = 2, CS = 16.5, PS = 3; DWL = 5

• Q = 3, CS = 16.5, PS = 3; DWL = 4

If the inverse market demand is p = 10 − 2q, what is the consumer surplus
when price is 4?

• CS = 6

• CS = 7

• CS = 9

If a specific subsidy​ (negative tax) of s is given to only one competitive​ firm, how should that firm change it output level to maximize its profit

To maximize profit with the​ subsidy, the firm should

• increase its production until

  p=MC−s.

• its production until

  p=s

• its production until

  p=MC+s