Page 164 - DECO101_MICRO_ECONOMICS_ENGLISH

Unit 10: Market Structure – Perfect Competition

10.7 Keywords Notes

Differentiation: Result of efforts to make a product or brand stand out as a provider of unique
value to customers in comparison with its rivals.

Equilibrium: Condition when the firm has no tendency either to increase or to contract its
output.
Homogeneous products: The product of an industry in which the outputs of different fi rms are
indistinguishable.

Minimum price: Price at which the sellers refuse to supply the goods at all and store it with
themselves.
Perfect competition: A market structure characterized by a complete absence of rivalry among
the individual fi rms.
Perfect mobility: The absence of any barriers to movement of factors of production
Profi t: Difference between total revenue and total cost Market period: A very short period in
which the supply is fixed, that is no adjustment can take place in supply conditions.

10.8 Self Assessment

State whether the following statements are true or false:
1. In a perfect market there are large number of sellers.
2. In a perfect market there is products differentiation.

3. In a perfect market a change in the output of a single firm will affect the market price of
the product.
4. In perfect market, market agents are not fully aware of market.
5. In a perfect market there is perfect mobility of resources.

6. Under perfect competition the price curve and the marginal revenue curve are the same.
7. Industry has no role in the determination of price under perfect competition.
8. When the supply of a commodity decreases and its demand remains constant then it leads
to decrease in price.

9. For equilibrium MC curve should cut the MR curve from below.
Fill in the blanks:
10. A perfectly competitive firm faces an ......................... elastic demand curve.

11. The closing down point is at which the firm covers its ......................... cost.
12. In the long run all costs are ......................... .

13. In the long run the best level of output is, where P = ......................... .
14. The LMC cuts the LAC at its ......................... point.
15. The ................ LRS is generally a feature of rapid growth.
16. The .................... of an industry might lead to a fall in prices of some of its input.

17. The factors of production are .......... to move in perfect competition.

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