Ge237P Homework 11, 12, 13

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GE237P April 24, 2012 Chapter 11 Pg 394 1.1 What are the three conditions for a market to be perfectly competitive? * There must be many buyers and many firms, all of which are small relative to the market * The products sold by all firms in the market must be identical * There must be no barriers to new firms entering the market 1.2 What is a price taker? When are firms likely to be price takers? Price taker – A buyer or seller that is unable to affect the market price A firm will be a price taker and will have to charge the same price as every other firm in the market or they won’t sell anything. 1.3 Draw a graph showing the market demand and supply for corn and the demand for the corn produced by one corn farmer. Be sure to indicate the market price and the price received by the corn farmer. Price of Corn (Dollars per Bushel) $4 Demand 0 6,000 15,000 Quantity of Corn (Bushel per year) Lisa Cortazzo Chapter 12 Pg. 425 3.1 What effect does the entry of new firms have on the economic profits of existing firms? As new coffeehouses open near the local Starbucks, the firms demand curve will shift to the left. The demand curve will shift because Starbucks will sell fewer caffe lattes at each price when there are additional coffeehouses in the area selling similar drinks. So the price shifts to the left. 3.2 What is the difference between zero accounting profit and zero economic profit? Zero accounting profit you were making an accounting profit Zero Economic profit shows you break even, even though you were earning an accounting profit Chapter 13 Pg 452 1.1 What is an oligopoly? Give three examples of

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