3.3 Revnue, Costs And Profit Flashcards

1
Q

What is perfect competition?

A

Perfect competition is a market structure in which individual firms have no market power due to lots of competition and no price setting power

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2
Q

What is imperfect competition?

A

Imperfect competition is a market structure where firms do have some market power and can influence prices

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3
Q

What is the total revenue rule?

A

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

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4
Q

What is marginal costs?

A

Marginal costs are the cost of producing an additional unit of output

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5
Q

What are some sources of external economies of scale?

A

Geographic cluster
Transport links
Skilled labour
Favourable legislation

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6
Q

What is profit maximisation?

A

Producing at where MC = MR

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7
Q

What is the short run shut down point?

A

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

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8
Q

What is the long run shut down point?

A

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

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