3.3 Revnue, Costs And Profit Flashcards
What is perfect competition?
Perfect competition is a market structure in which individual firms have no market power due to lots of competition and no price setting power
What is imperfect competition?
Imperfect competition is a market structure where firms do have some market power and can influence prices
What is the total revenue rule?
The total revenue rule states that in order to maximise revenue firms should increase the price of inelastic goods and decrease the prices of elastic goods
What is marginal costs?
Marginal costs are the cost of producing an additional unit of output
What are some sources of external economies of scale?
Geographic cluster
Transport links
Skilled labour
Favourable legislation
What is profit maximisation?
Producing at where MC = MR
What is the short run shut down point?
If AR is higher than AVC the firm should keep producing
But if AR falls to AVC (AR = AVC) the firm should shut down n
What is the long run shut down point?
If AR is higher than AC (AR>AC) the firm should keep producing
But if AR is equal or lower than AC (AR=AC) the firm should shut down