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9 Cards in this Set
- Front
- Back
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price taking producer
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producer whose actions have no effect on the market price of the good it sells
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price taking consumer
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consumer whose actions have no effect on the market price of the good he or she buys.
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perfectly competitive market
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market in which all market participants are price takers
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commodity
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output of different producers regarded by consumers as all the same good; aka standardized product
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free entry and exit
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when new producers can easily enter into or leave an industry
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marginal revenue
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change in total revenue generated by an additional unit of output.
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optimal output rule
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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.
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break-even price
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the break even price of a price-taking firm is the market price at which it earns zero profits
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shut-down price
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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).
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