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16 Cards in this Set
- Front
- Back
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Perfectly competitive firms aren't competitive because... |
The price of their product has no market power and won't affect market price |
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Markets have a competitive structure when... |
Firms have little/no market power |
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Characteristics of perfect competition |
1. All firms sell identifical product 2. Consumers know nature of the product and the prices charged 3. Level of output at which long-run ATC is minimum is small relative to the average output 4. There is freedom of entry and exit |
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Profit (pi) |
= TR - TC |
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Average product (AP) |
= TP/L Total product / labour |
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Marginal product (MP) |
= △TP / △L = Change in total product / change in labour |
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Total cost (TC) |
= TFC + TVC Total fixed cost + total variable cost |
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Average total cost (ATC) |
= TC / Q = AFC + AVC |
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MR > MC MR > AVC |
increase output |
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MR < MC |
decrease output |
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when the MP curve cuts the AP curve from above, |
the AP curve begins to fall. |
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When total product is increasing at an increasing rate, marginal product is: |
positive and increasing. |
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capacity |
minimum ATC cost where ATC does not rise |
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If total product is at its maximum, then |
marginal product must be falling and be equal to zero. |
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a firm would not produce at all if |
1. TR is less than TVC, or, 2. market price (p) is less than AVC |
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At what price would a profit −maximizing firm earn zero economic profits? |
Find ATC, then divide by output. Lowest amount is the answer |
