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Market structures and marginal analysis · Part 2 of 4
9 exam-style questions with model answers, plus 9 quick multi-choice questions — every question on this part of the standard, grouped by the 3 pages of notes they come from.
Write a full answer before you reveal the model one. That comparison is where the learning happens.
State the four characteristics of a perfectly competitive market, and explain how ONE of them makes the firm a price taker.
An illustrative perfectly competitive firm faces a market price of $12. At its profit maximising output of 4,000 units, average cost is $15.
Calculate the firm's profit or loss, and explain in detail why the firm continues to produce in the short run despite this result.
Severe weather damages crops across a perfectly competitive agricultural market, reducing the quantity each grower can supply.
Compare and contrast the impact on the market and on an individual firm's output, price and profit. Refer to supply and demand and cost and revenue models in your answer.
Explain what happens in a perfectly competitive industry when firms are making subnormal profit.
Explain in detail why a perfectly competitive firm ends up producing at the minimum of its average cost curve in the long run.
An increase in fixed costs hits every firm in a perfectly competitive industry.
Compare and contrast the short run and long run impact on an individual firm's output, price and profit. Refer to cost and revenue models in your answer.
A firm's fixed costs increase. Explain what happens to its marginal cost curve and to its profit maximising output.
Explain in detail the difference in the short run profit maximising output for a perfectly competitive firm following an increase in fixed costs compared with an increase in variable costs. Refer to the cost curve shifts in your answer.
Council rates (a fixed cost) rise for every farm in a perfectly competitive industry.
Compare and contrast the short run and long run profit maximising positions for a farm, referring to the characteristics of perfect competition, marginal analysis, and output, price and profit. Refer to a cost and revenue model in your answer.