(Demand Under Perfect Competition)

1. What type of demand curve does a perfectly competitive firm face? Why?

2. Explain the different options a firm has to minimize losses in the short run.

3. (The Short-Run Firm Supply Curve) Each of the following situations could exist for a firm in the short run. In each case, indicate whether the firm should produce in the short run or shut down in the short run, or whether additional information is needed to determine what it should do in the short run

a. Total cost exceeds total revenue at all output levels.
b. Total variable cost exceeds total revenue at all output levels.

4. (The Long-Run Industry Supply Curve) A normal good is being produced in a constant-cost, perfectly competitive industry. Initially, each firm is in long-run equilibrium. Briefly explain the short-run adjustments for the market and the firm to a decrease in consumer incomes. What happens to output levels, prices, profits, and the number of firms?

5. (Long-Run Industry Supply) Why does the long-run industry supply curve for an increasing-cost industry slope upward? What causes the increasing costs in an increasing-cost industry?

6. The National Council of Economic Education's EconEdLink has an interesting module on the economics of Internet access at http://www.econedlink.org/lessons/index.cfm?lesson=NN10 Please review the materials provided. Is provision of Internet access a competitive industry? Briefly discuss.

7. Commodities like gold often trade in markets that are examples of perfect competition. Think a commodity that you believe trades in a perfectly competitive market, and describe why you believe this is so.

8. (The Short-Run Firm Supply Curve) An individual competitive firm's short-run supply curve is the portion of its marginal cost curve that equals or rises above the average variable cost. Explain why.

9. What are the major characteristics of perfectly competitive market?

10. (Perfect Competition and Efficiency) Define productive efficiency and allocative efficiency. What conditions must be met to achieve them?