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24 Cards in this Set
- Front
- Back
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What are the 4 market models? |
Pure competition, pure monopoly,monopolistic competition, and oligopy |
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Front (Term) Pure competition |
Back (Definition) Involves in a very large number of firms producing a standardized product. New firms can enter or exit the industry very easily. |
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Pure monopoly |
A market structure in which one firm is the sole seller of a product or service. They produce the single product, so product differentiation is not an issue. |
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Monopolistic competition |
Characterized by a large number of sellers producing differentiated products. They do not distinguish their production the basis of price but instead on design and workmanship. |
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Oligopoly |
Involves only a few sellers of a standardized or differentiated product, so each firm is affected by the decisions of its rivals and must take those decisions into account into determining its own price and output. |
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What are the characteristics of pure competition? |
Very large numbers Standardized products Price takers Free entry and exit |
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Very large numbers |
A basic feature of a purely competitive market . |
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Standardized product |
As long as the price is the same consumers will be indifferent about which seller to buy the product from.because purely competitive firms sell standardized products, they make no attempt to differentiate their products and do not engage in other forms of non price competition. |
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Price takers |
In a competitive market,Individual firms do not have control over prices of product. It cannot change market price it can only adjust to it. |
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Free entry and exit |
New firms can freely enter and existing firms can leave purely competitive industries. Nothing prohibits new firms from selling their output in any competitive market. |
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Average revenue |
Total revenue from the sale of a product divided by the quantity of the product sold ; equals to the price at which the product is sold when all units of the product are sold at the same price. |
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Total revenue |
The total number of money received by a firm from the sale of a product
(By multiplying price by quantity the firm can sell) |
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Marginal revenue |
The change in total revenue that results from the sale of 1 additional unit of a firms product, equal to the change in total revenue divided by the change in the quantity of the total product sold. |
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What are the two ways to determine the level of output at which a competitive firm will realize maximum profit or minimum loss? |
To compare total revenue and total cost To compare marginal revenue and marginal cost |
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How is the total revenue for each output level found? |
By multiplying output (total product) by price. |
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What does total cost increase with? |
It increase with output , because more production requires more resources. |
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Break every point |
An output at which a filmmaker a normal profit but not an economic profit. |
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What happens when out out is relatively low? |
Marginal cost revenue will usually exceed marginal cost. |
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What happens when output is relatively high ? |
Rising marginal cost will exceed marginal revenue. |
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What is the output determining rule? |
In the short run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost ( as Long producing is preferable to shutting down) |
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What is the profit maximizing guide known as? |
MR= MC rule |
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MR = MC rule |
The principle that a firm will maximize its profit (or minimize its losses) by producing the output at which marginal revenue and marginal cost are equal, provided product price is equal to or greater than average variable cost. |
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What is an easier way to calculate economic profit? |
Profit = (P-A) x Q
* by subtracting the average total cost from the product price and multipliying that amount by the units of output |
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Short run supply curve |
The solid segment of the marginal cost curve MC . It tells us the amount of output the firm will supply at each price in a series of prices. |
