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9 Cards in this Set
- Front
- Back
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Market Structure
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all the features of a market that affect the behavior and perfomance of firms in that market
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Market Power
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the power to raise product price without losing all of one's sales
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Behavioral assumption
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all firms seek to maximize economic profit
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2 methods of choosing Q so as to maximize econoic profit in the short run
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-total-revenue-total cost approach
-marginal-revenue-marginal-cost approach |
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2 Key things to Max Profit
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-MR=MC (P=MC) Increase Q as long as MR > MC until MR=MC
-P>AVC shutdown |
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Five Possible Cases in the Short Run
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-P>ATC->profit>0
-P=ATC->profit=0 -ATC>P>AVC->0>profit>-TFC -P=AVC->profit=-TFC<0 -P<AVC->profit<-TFC<0 |
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2 rules for perfectly competitive firm
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-P=MC
-P>equal to AVC |
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Productive effieciency
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P=Minimum aTC
only firms that produce in the least costly way will survive in the long run |
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Allocative efficiency
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P=MC
neither too few nor too many resources are devoted to the production of the product |
