Reference no: EM13882764

1. Identify the 4 criteria for the existence of perfect competition.
2. Explain the meaning behind the economic term 'price taker'.
3. Explain why in perfect competition marginal revenue must equal price.
4. If fixed costs are $100 and variable costs are $200 at an output level of 30 units, what are the average fixed costs, average variable costs, and average total costs? AFC?

   Quantity	Fixed Cost	Total Cost	Average Fixed Cost	Average Variable Cost	Average Total Cost	Marginal Cost
   10	5,000	5,500
   20	5,000	5,800
   30	5,000	6,000
   40	5,000	6,100
   50	5,000	6,150
   60	5,000	6,175

5. In the table above, fill in the empty cells with the correct answers. You may just copy this table into a 'Word' document and fill in the cells there and attach the document to your completed homework assignment.
6. Explain why to maximize profits a firm needs to produce an output at a level where marginal revenue = marginal costs. Why not produce a lesser quantity
7. Explain why a firm should not produce an output at a level where marginal cost is greater than marginal revenue.
8. How does competition among online music retailers influence economic profit?
9. Suppose that the restaurant industry is perfectly competitive. Joe's Diner is always packed in the evening but has less than half of the number of those customer at lunchtime. What reason would Joe have for staying open for lunch?
10. Assume that there is a huge increase in demand for your product. In a perfectly competitive market, explain why the price you get for your product will rise at first and then begin to gradually fall until it is once again at equilibrium.