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5 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Assumptions of a PC firm
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Many firms
Insignificant market share Nobody can influence price Price takers Homogeneous products Most competition No BTE Perfect knowledge |
How many firms
Mkt share Type of product Competition level Price taker or setter BTE Perfect or imperfect knowledge |
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Profit maximising when?
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MC=MR
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What cut what
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Short run profit?
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Super normal
Sub normal |
What types of profit are there
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Long run profit
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Normal because
Super normal profit will attract other firms to enter the industry due to low BTE ss curve shifts to the right so the price will drop and output will increase resulting in the firm's super normal profit to be competed away then some people will leave the industry. Now with only normal profit other firms will not be attracted to join the industry. In the case of sub normal profits Firms will decide to leave the industry thus the ss curve will shift to the left resulting to when they earn normal profits again firms will not leave when they manage to earn normal profits. Therefore short run they can earn either super normal or subnormal profits but in the long run only normal profits This does not give forms any profits to engaage in innovation or r&d to make their products more differentiated. |
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Why is there productive efficiency?
Why allocative efficient? |
Produce at the lowest cost possible at MC=AC
Allocative efficient because MC=AR M |
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