Microeconomics by Campbell McConnell 21 Edition-Test Bank

Microeconomics by Campbell McConnell 21 Edition-Test Bank

CHAPTER 10
Pure Competition in the Short Run

A. Short-Answer, Essays, and Problems

1. Describe what is meant by market structure.

2. How does pure competition differ from other basic market models?

3. What are some examples of the four different market structures?

4. Compare and contrast the types of products produced across the four types of market structures, are they similar of differentiated.

5. For the list of products below explain which of the four different market structures best describes the market.
(a) Tennis Shoes
(b) Wheat
(c) Cable Television
(d) Video Gaming Consoles

6. What type of market best describes the exchange rate for currencies? Why?

7. What are four characteristics of pure competition?

8. Why can’t an individual firm raise its price by reducing output or lower its price to increase sales volume in a purely competitive market?

9. How would you describe the demand curve for the purely competitive firm? For the industry?

10. What is the difference between average, total, and marginal revenue? What is the shape of the total and marginal revenue curves for the individual competitive firm?

11. Why does price equal marginal revenue for the purely competitive firm? What is the relationship to the demand curve for the firm?

12. Below is a demand schedule facing an individual firm. Complete the table by computing average revenue, total revenue, and marginal revenue. Then answer the following two questions: (a) How can you tell whether a firm is operating in a market that is purely competitive? (b) What relationship exists between average revenue and marginal revenue?
Price Quantity demanded Average revenue Total revenue Marginal revenue
$30 0 $_____ $_____ —
30 1 _____ _____ $_____
30 2 _____ _____ _____
30 3 _____ _____ _____
30 4 _____ _____ _____
30 5 _____ _____ _____
30 6 _____ _____ _____

13. An airline is flying between two cities. The airline has the following costs associated with the flight:
Crew $4000 Plane daily depreciation $2000
Fuel 1000 Plane daily insurance 2000
Landing fee 1000
The airline has an average of 40 passengers paying an average of $200 for this flight. Do you think the airline should be flying between the two cities? Evaluate from a short-run perspective.