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Perfect Competition
Monopolistic Comp.
Chapter 16
Chapter 24
Etc
100
What is the profit maximizing equation that perfectly competitive firms use to find the optimum quantity to produce compared to that which monopolistically competitive firms will opt to use?
MR = MC; MR = MC
100
What are the two equations we use for calculating profit?
TR - TC; (P-ATC)Q
100
What are the four factors of production?
Land, Labor, Capital and Entrepreneurship
100
GDP is the sum of the ______ _____ of all ________ _____ and ________ ________ within a country's _______ in a given period of time.
GDP is the sum of the market value of all finished goods and services produced within a country's borders in a given period of time.
100
Under what circumstances should a company shut down?
if P < AVC
200
What is the most recognizable characteristic of a perfectly competitive market?
That it has a homogeneous good or service
200
What is the most recognizable characteristic of a monopolistically competitive market?
Heterogeneous good or service
200
What is derived demand?
the demand for a good or service that is a consequence of the demand for something else (the factors of production in our case).
200
What is the expenditure formula:
GDP = C + I + G + NX NX = Exports - Imports
200
What is the percent change formula?
((Xnew - Xold)/Xold)*100
300
You have been promoted to the highest ranking manager of Whataburger in Stillwater. A graph is brought to your attention that shows that your firm is producing at a point where marginal revenues are exceeding marginal costs. What should you do?
Ramp up production until the point where MR = MC
300
Explain how firms earning a profit can be comparable to sharks when there is blood in the water.
Competitors will rush to wherever there is profit to be made in the same way that sharks will rush to wherever there is blood because there are no barriers to entry. This results in the supply curve in the market shifting down and to the right which lowers the price, but increases the quantity supplied.
300
In a labor market, what equation do we use to find a firm's Demand?
VMPl = Price of the output * the marginal product of that worker
300
What is the equation for GDP deflator?
Nominal GDP / Real GDP
400
What can we expect to happen to 1) the price of the good or service, and 2) the profit margin per firm when a number of firms enter a perfectly competitive market?
We can expect the price to decrease and the profits of each firm to decrease as a result.
400
Why are monopolistically competitive firms described as being price setters compared to perfectly competitive firms who are described as being price takers?
When setting their price, it is up to the monopolistically competitive firm to go up to the demand curve after they find the optimal quantity to produce (MR = MC). This is not the case in a perfectly competitive market in that MR already equals demand.
400
How does one find a firm's profit-maximizing quantity of labor?
One looks to the point where the VMPl is greater than or equal to the wage rate.
400
How do we calculate Real GDP, and how would you describe it in your own words?
RGDP = base year prices * current year quantities RGDP = NGDP - inflation
500
You have decided to drop out of college to pursue a career as a potato farmer. The price market price for potatoes is currently at $0.50, but the future is always uncertain. The firm decides to increase production from 300 potatoes to 450. What will happen to the firm's marginal revenue? a) it will stay the same. b) it will increase from $150 to $225. c) it will decrease from $225 to $150. d) None of the above is true.
a) it will stay the same