Perfect Competition Insights and Analysis | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Seminar 8 Questions BEC4001 Perfect Competition
1. Why is a firm in perfect competition a price taker?
2. In perfect competition, what is the relationship between the demand for the firm’s output and the market demand?
3. In perfect competition, why is a firm’s marginal revenue curve also the demand curve for the firm’s output?
4. China’s Phone Makers Look to India for Growth
China produces smartphones, and hundreds of millions of Chinese have bought
one. With intense competition among more than 150 brands, China’s smartphone
producers are looking to capture the Indian market.
Source: The New York Times, May 12, 2015
a. Explain the effects of the increase in Indian demand for smartphones on the market
for smartphones and on an individual smartphone producer in the short run.
b. Draw a graph to illustrate your explanation in part (a).
5. A firm in the competitive industry has the following costs: Q 0 5 10 15 20 25 30 35 40 45 50 ATC - 800 460 333 260 216 190 180 185 191 208 AVC - 200 160 133 110 96 90 94 110 124 148 AFC - 600 300 200 150 120 100 85,7 75 66,7 60 TC VC MC
a. Calculate TC, FC, VC, and MC of this firm? Explain your answers.
b. At which price does the firm have profit? Explain your answers.
c. At which price does the firm choose to shut down? Explain your answers.
d. The market price is 239. What is the maximum profit quantity for this firm? Calculate the maximum profit.
6. The market for paper is perfectly competitive and there are 1,000 firms that
produce paper. The table sets out the market demand schedule for paper.
Each producer of paper has the following costs when it uses its least-cost plant.
a. What is the market price of paper?
b. What is the market’s output?
c. What is the output produced by each firm?
d. What is the economic profit made or economic loss incurred by each firm?
e. As more and more computer users read documents online rather than print them,
the market demand for paper decreases and in the short run the demand schedule becomes
What is the market price and the economic profit or loss of each firm in the short run? 7.
A firm in the perfectly competitive market has a total cost function The market price is 1200. a.
What is the quantity that this firm maximize its profits? Compute this profit. b.
What are the quantity and price where the firm is break-even (earn zero profit). c.
What are the quantity and price where the firm shuts down? d.
Draw a figure showing the supply curve of this firm.