Chapter 12 - Perfect Competition Flashcards
1
Q
Pc arrises when…
A
A single firm’s minimum efficient scale is small relative to the market demand.
2
Q
Price taker
A
A firm that cannot influence the price of a good/ service
3
Q
Advantages of scale
A
Factors beyond the firm’s control which decrease the firm’s cost as the market output increases.
4
Q
Disadvantages of scale
A
Factors beyond the firm’s control which increase the firm’s costs as the market output increases.
5
Q
Outcomes of competitive markets
A
- price = lowest possible costs
- consumers on demand curve
- producers on supply curve
- socially efficient quantity produced
- max total surplus
- > can’t make anyone better-off without making someone else worse-off
6
Q
Barriers to entry
A
- exclusive ownership of a resource
- legal barriers
- natural barriers
7
Q
Excess capacity
A
Produces less than the quantity at which the average total cost is a minimum.
8
Q
Mark up
A
Amount by which price exceeds marginal cost.
