How can we help?

You can also find more resources in our Help Center.

37 terms

Microeconomics Chapter 8

STUDY
PLAY
agriculture
what is an example of pure competition
no product advertising, freedom of entry and exit, individual firm is a price taker, standardized product, very large number of small sellers
what are the characteristics of pure competition
identical products, no distinguishable features, perfect substitutes
a standardized product has:
has no control over price, firm produces a small portion of output relative to the entire market
a characteristic of pure competition is individual firm is a price taker, what does that mean?
there are no obstacles or barriers preventing firms to enter or leave the industry
what does freedom of entry and exit mean
all firms produce identical products
no product advertising means
the intersection of the market demand and supply curve
competitive firm's demand curve is determined by _____.
perfectly elastic
a competitive firms demand curve is ___________
market price
if the firm raises price above the ________, then it will sell nothing
downward sloping
the market's demand curve is
marginal revenue
change in total revenue resulting from the sale of one more unit of output
marginal revenue
measures how much an additional unit sold adds to the firm's total revenue
marginal revenue
price equals ______ at all levels of output
lower price, output
a competitive firm does not have to have to __________ to sell more ______. Therefore, each additional unit sold adds exactly its price to the firm's total revenue.
competitive curves demand curve
a competitive firms marginal revenue curve is the same as a ___________.
total revenue cost
marginal revenue is the slope of the _________.
total approach, marginal approach
what are the two approaches to short run profit maximization
profit max case, break-even or normal profit case, loss minimization, indifferent, shutdown
what are the cases of the total approach
profit maximum case
total revenue exceeds total cost by greatest amount TR>TC
break-even or normal profit case
TR=TC
loss minimization case
produce if loss is less than fixed cost TVC<TR<TC
indifferent case
loss equals fixed cost, TVC=TR
shutdown case
loss greater than fixed cost TVC > TR
profit maximum case
P > ATC
break-even or normal profit case
ATC=P
loss minimization case
AVC < P < ATC
indifferent case
AVC=P
shutdown case
AVC<P
short run - marginal approach
profit maximum, MR=MC or P=MC, since MR=P
MR>MC
profit will rise by increasing output because the firm is adding more to total revenue than cost
MR<MC
profit will rise by decreasing output because the firm is adding more to total revenue than cost
MR=MC
when short run profit maximization is _____, the profit is at its maximum
profit
if P>ATC then there is a ______ according to short run profit maximization-marginal approach
loss
if P<ATC, then there is a ______ according to short run profit maximization-marginal approach
average total cost
per-unit profit= price minus
marginal cost, average variable cost
a competitive firm's short run supply curve is the portion of the ________ that lies above the ______ curve
marginal cost, average variable cost
the short run market supply curve for a competitive industry is obtained by summing horizontally the segments of the __________ curves lying above the _______ curves for all the firms in the industry