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9 Cards in this Set

  • Front
  • Back
price taking producer
producer whose actions have no effect on the market price of the good it sells
price taking consumer
consumer whose actions have no effect on the market price of the good he or she buys.
perfectly competitive market
market in which all market participants are price takers
output of different producers regarded by consumers as all the same good; aka standardized product
free entry and exit
when new producers can easily enter into or leave an industry
marginal revenue
change in total revenue generated by an additional unit of output.
optimal output rule
profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost.
break-even price
the break even price of a price-taking firm is the market price at which it earns zero profits
shut-down price
a firm will cease producition in the short run if the market price falls below the shut-down price, which is equal to minimum average variable cost (AVC).