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11 Cards in this Set
- Front
- Back
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Define Market Structure.
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The number and relative size of firms in a market structure.
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What are the characteristics of perfect competition?
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Many Producers
Identical Product No/ Low overhead |
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Why does a perfectly competitive firm produce such a small share of the output?
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Because with a large number of the same types of firms the output is evenly distributed.
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How does a perfectly competitive firm determine a price and level of output?
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They price their product to the market price in order to keep a consistent output.
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Define Total Profit.
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The difference between total revenue and total cost.
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Illustrate Profit Maximization.
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What is Marginal revenue?
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The increase in total costs associated with a one unit increase in production.
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Why does price equal marginal revenue for a perfectly competitive firm?
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Because MR=P under perfect competition.
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When does a firm operate at a loss?
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Price < ATC
Price > AVC |
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When does a firm operate at a profit?
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TR>TC
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What is the shutdown point for a firm?
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Price =< minimum ATC
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