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Economics

Campbell McConnell, Stanley Brue, Sean Flynn

Chapter 10

Pure Competition in the Short Run - all with Video Answers

Educators

Chapter Questions

05:17

Problem 1

Briefly state the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Into which of these market classifications does each of the following most accurately fit? (a) a supermarket in your hometown; $(b)$ the steel industry; $(c)$ a Kansas wheat farm; $(d)$ the commercial bank in which you have an account; $(e)$ the automobile industry. In each case, justify your classification.

Brandon Miskanic
Brandon Miskanic
Numerade Educator
01:03

Problem 2

Strictly speaking, pure competition is relatively rare. Then why do we study it?

Brandon Miskanic
Brandon Miskanic
Numerade Educator
02:09

Problem 3

"Even if a firm is losing money, it may be better to stay in business in the short run." Is this statement ever true? If so, under what condition(s)?

Kaylee Mcclellan
Kaylee Mcclellan
Numerade Educator
03:26

Problem 4

Consider a firm that has no fixed costs and that is currently losing money. Are there any situations in which it would want to stay open for business in the short run? If a firm has no fixed costs, is it sensible to speak of the firm's distinguishing between the short run and the long run?

Daniel Cisneros
Daniel Cisneros
Numerade Educator
02:30

Problem 5

Why is the equality of marginal revenue and marginal cost essential for profit maximization in all market structures? Explain why price can be substituted for marginal revenue in the $\mathrm{MR}=\mathrm{MC}$ rule when an industry is purely competitive.

Brandon Miskanic
Brandon Miskanic
Numerade Educator
01:27

Problem 6

"The segment of a competitive firm's marginal-cost curve that lies above its AVC curve constitutes the firm's short-run supply curve." Explain using a graph and words.

Crystal Wang
Crystal Wang
Numerade Educator
02:15

Problem 7

You are given an old car by your uncle, who wants you to keep it in working condition so that you can hand it off to your younger brother in three years. It will cost you $$\$ 1,500$$ per year to keep it in working condition for your brother. If you skip maintenance altogether, the car will die after two years, but you can pocket the maintenance costs. What will you be tempted to do? Would higher maintenance costs make you more or less likely to do what your uncle wants? Explain.

Carson Merrill
Carson Merrill
Numerade Educator