Exam 10: Competitive Markets

At the point of minimum AVC:

When profits are maximized in a competitive market, average cost is always:

Short-run Firm Supply. Give Me a Pane, Inc., distributes window glass to hardware and building supply chains located throughout the Northeast. Like several grain and commodity markets, the market for common single-pane glass is perfectly competitive. The company's technology defines a marginal cost per pound of single-pane glass given by the relation: where Q is pounds of single-pane glass.

In the long run, firms will exit a perfectly competitive industry if:

Perfectly Competitive Equilibrium. Office building maintenance plans call for the stripping, waxing, and buffing of ceramic floor tiles. This work is often contracted out to office maintenance firms, and both technology and labor requirements are very basic. Supply and demand conditions in this perfectly competitive service market in St. Paul, Minnesota, are: where Q is thousands of hours of floor reconditioning per month, and P is the price per hour.

Effects of market structure are not typically measured in terms of:

Long-run Firm Supply. The Los Angeles retail market for unleaded gasoline is fiercely price competitive. Consider the situation faced by a typical gasoline retailer when the local market price for unleaded gasoline is $2.50 per gallon and total cost (TC) and marginal cost (MC) relations are:

In the short run, a perfectly competitive firm will shut down and produce nothing if:

Short-run Market Supply. Motor City Music is a local distributor of musical CDs featuring compilations of classic rock recordings by various artists. Motor City's marginal cost of output is described by the relation: where Q is CDs sold per year.

Competition tends to be light when:

Competitive Market Equilibrium. Happy Valley Supply, Inc., provides recycled toner cartridges for printers. Like its competitors, Happy Valley must meet strict specifications. As a result, the replacement toner cartridge market can be regarded as perfectly competitive. Total and marginal cost relations per week are: where Q is the number of recycled toner cartridges.

Product Differentiation. Suggest whether each of the following statements is true or false and illustrate why. A. Sources of product differentiation include only physical differences, not merely perceived differences. B. Price competition tends to be most vigorous for products with many actual or perceived differences. C. The availability of good substitutes decreases the degree of competition. D. Competition tends to be less vigorous when buyers and sellers have easy access to detailed price/product performance information. E. The availability of good complements increases the degree of competition.

Perfectly Competitive Equilibrium. Fuel costs have risen sharply during recent years as consumption, refining and production costs have increased. Demand and supply conditions in the perfectly competitive domestic crude oil market are: where P is price per barrel and Q is quantity in millions of barrels per day .

The firm demand curve in a competitive market is:

Short-run Firm Supply. Whole Fruit, Inc., distributes oranges to wholesalers located throughout the country. Like several grain and commodity markets, the market for oranges is perfectly competitive. The marginal cost per crate of oranges is:

Perfectly Competitive Equilibrium. Fuel costs have risen quickly during recent years as consumption, refining and production costs have risen sharply. Supply and demand conditions in the perfectly competitive domestic crude oil market are: where Q is quantity in millions of barrels per day, and P is price per barrel.

So long as P > AVC, the competitive firm's short-run supply curve is equal to:

Graphically, competitive market supply is measured by the:

Market structure is not typically characterized on the basis of:

Firm Supply. Credit Check, Inc., offers credit checking services to credit card companies and retailers. The following relation exists between the number of credit checks performed and total costs in this viciously competitive market: