Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
25 Cards in this Set
- Front
- Back
- 3rd side (hint)
|
Perfect Competition exists when:
|
-many firms sell an identical product to many buyers
-there are no restrictions on entry or exit to the market -established firms have no advantage over new firms - sellers and buyers are well informed about prices |
|
|
|
A price taker is:
|
someone who cannot influence price of its product.
|
|
|
|
Which market type is a price taker?
|
perfect competition
|
|
|
|
Economic profit =
|
total revenue - total cost of production
|
|
|
|
Marginal revenue is
|
the change in total revenue that results from a one unit increase in quantity sold.
|
|
|
|
In the long run, a firm in perfect competition earns:
|
Normal profit.
|
|
|
|
What is normal profit?
|
Zero economic profit and zero economic loss in the long run.
|
|
|
|
What is an incentive for new firms to enter perfect competition (or a market)?
|
Economic profit
|
|
|
|
What happens as new firms enter the market in perfect competition?
|
The price falls and economic profit of each existing firm decreases.
|
|
|
|
What is an incentive for firms to leave the market in perfect competition?
|
Economic loss
|
|
|
|
What happens as firms exit the market in perfect competition?
|
the price rises and the economic loss of each remaining firm decreases.
|
|
|
|
What are external economies?
|
Factors beyond control of an individual firm that lower its costs as the market output increases.
|
|
|
|
The change in the long run equilibrium price depends on what?
|
External economies and external diseconomies.
|
|
|
|
External diseconomies?
|
factors outside the control of a firm that raise the firms's costs as market output increases.
|
|
|
|
What is the long run market supply curve:
|
shows the relationship b/w the quantity supplied and the price as the number of firms adjusts to achieve zero economic profit.
|
|
|
|
What is the shut down point in perfect competition?
|
the output and price at which price equals minimum average variable cost.
|
|
|
|
What is a monopoly?
|
arises when one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms.
|
|
|
|
What is Monopolistic competition?
|
when a large number of firms compete by making similar but slighty different products.
|
nike, fila, reebock..
|
|
|
Oligopoly:
|
when a small number of firms compete. Can produce almost identical products or differentiated products.
|
airplane manufacturer, kodak and fuji
|
|
|
People in perfect competition face what kind of demand?
|
perfectly elastic b/c the other firms have perfect subsitutes.
|
|
|
|
Profit is maximized how?
|
At the output level at which total revenue exceeds total cost by the largest amount.
|
|
|
|
Because of __________, total cost eventually increases faster than total revenue.
|
Decreasing marginal returns
|
|
|
|
In perfect competition, on a graph, economic profit is...
|
the vertical distance b/w the total cost and total revenue curves.
|
|
|
|
In perfect competition, marginal revenue equals...
|
The market price
|
|
|
|
In perfect competition, profit is maximized when
|
marginal cost equals marginal revenue.
|
|
