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Flashcards in Chapter 10 Deck (12):
1

entry

Long-run process of expanding production in response to a sustained pattern of profit opportunities.

2

market structures

Structures in which a business can sell its products. These include perfect competition, monopolistic competition, oligopoly, and monopoly.

3

Perfect Competition

Market structure with numerous buyers and sellers. The firms offer homogenous product, perfect information, and knowledge.

4

Monopolistic Competition

Involves many firms competing against each other in the sales of somewhat distinctive products. Examples include clothing stores that sell different styles of clothing and restaurants that offer differing cuisines. Monopolistic competition even includes distinct producers who sell items—such as gold balls or beer—that may be somewhat similar but differ in public perception due to branding and advertising.

5

Oligopoly

Market structure in which a small number of firms, perhaps just two or three, sell all of the output.

6

Monopoly

Market structure in which one firm produces all of the output in a market.

7

price takers

Description of firms in perfect competition. If a firm in a perfectly competitive market raises the price of its product by so much as a penny, it will lose all of
its sales to competitors. Pressure from competing firms forces them to accept the prevailing price in the market.

8

market power

Refers to a firm’s ability to raise and maintain the price of its product.

9

Marginal revenue

(MR) The additional revenue received when one more unit of a product is sold. In perfect competition, the marginal revenue equals price (P), i.e., MR = P. Since perfectly competitive firms have no market power, when they change their level of output, the market price does not change.

10

Marginal cost

The additional cost of producing one more unit. Marginal cost can be calculated by taking the change in total cost and dividing it by the change in quantity.

11

shutdown point

The intersection of the average variable cost curve and the marginal cost curve, which shows the price where a firm lacks enough revenue to cover its variable costs.

12

Exit

Long-run process of reducing production in response to a sustained pattern of loss.