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To what does industry structure refer? What are the major types of industry structures?
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What is the central concept driving the structure-conduct-performance paradigm?
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Identify several types of market conduct.
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How is market performance measured?
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What is the most important requirement of perfect competition?
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Illustrate the price taker concept.
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Define marginal revenue.
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What is the relationship between the industry market price and the firm’s marginal revenue in a perfectly competitive industry?
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Define a homogenous product.
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What does free entry and exit mean? Why is this assumption important?
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What does perfect or complete information mean? What does this assumption ensure?
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Explain the externalities problem.
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Explain the public goods problem.
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Why is the market failure concept so important?
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Given a market structure of perfect competition, what kind of conduct with respect to pricing can we expect? What is the profit-maximizing rule?
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If the profit-maximizing firm always sets its output at a level where marginal cost equals marginal revenue, then what must be true about the firm’s supply curve?
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Explain the shutdown condition or shutdown rule.
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Illustrate long run equilibrium for the competitive firm. What does price equal and how much economic profits does it earn?
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What is the difference between accounting and economic profits?
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What is the relationship between price and average total cost in the long run equilibrium?
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What is the difference between allocative and productive efficiency?
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Explain Pareto Optimality.
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Illustrate consumer and producer surplus and the dead weight loss.
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A perfectly competitive market yields the most efficient use and allocation of resources, as embodied in productive and allocative efficiency. Yet still, there are several problems. Describe two.
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What is the difference between positive versus normative analysis?
