Perfect Competition in the Short Run- Microeconomics Topic 3.7 (1 of 2)

Mr. Clifford introduces perfect competition, a market structure where firms are price-takers with identical products. He explains the characteristics of perfect competition, such as many small firms and no control over prices. Using graphs, he illustrates how firms operate in this market, focusing on the horizontal demand curve and the concept of marginal revenue. The video also covers the profit-maximizing rule, where firms produce where marginal revenue equals marginal cost, and demonstrates how to calculate profit using cost curves.

Which of the following is NOT a characteristic of perfect competition?

• Products are identical.

• Firms are price-makers.

• There are many small firms.

• Firms are price-takers.

In a perfectly competitive market, what happens if a firm tries to set a price above the market price?

• It will sell more products.

• It will sell the same amount of products.

• It will not sell any products.

• It will sell fewer products but at a higher profit.

What does the horizontal demand curve in perfect competition indicate?

• Demand is perfectly inelastic.

• Firms can set their own prices.

• Demand is perfectly elastic.

• Firms have no control over the market price.

What is the profit-maximizing rule for firms in perfect competition?

• Produce where average cost is minimized.

• Produce where marginal cost equals marginal revenue.

• Produce where total revenue equals total cost.

• Produce where marginal revenue exceeds marginal cost.

How is economic profit calculated in a perfectly competitive market?

• Total revenue minus total cost.

• Price times quantity sold.

• Total cost minus total revenue.

• Average cost times quantity sold.