1.
Barriers to entry: social, political, or economic impediments that prevent firms from entering a market. ex. legal barriers
2.
firms' products are identical: each firm's output is indistinguishable from any other firm's output
3.
long run: in the long run firms earn zero profit
4.
marginal cost: the change in total cost associated with a change in quantity.
5.
marginal revenue: the change in total revenue associated with a change in quantity.
6.
normal profit: the amount the owners of business would have received in the next-best alternative.
7.
Perfectly competitive market: 1) both buyers and sellers are price takers. 2) the number of firms is large. 3) there are not barriers to entry 4) firms' products are identical 5) there is complete information 6) selling firms are profit-maximizing entrepreneurial firms.
8.
Perfectly competitive market: a market in which economic forces operate unimpeded.
9.
price taker: a firm or individual who takes the price determined by market supply and demand as given.
10.
profit-maximization: MC=MR=P
11.
shutdown point: the point below which the firm will be better off if it temporarily shuts down than it will if it stays in business.
12.
The number of firms is large: anyone firm's output compared to the market output is imperceptible, and what one firm does has no influence on what other firms do.