Chapter 6 Flashcards
(8 cards)
The perfectly competitive firm is said to be a
price taker- it takes the price given by the market.
A perfectly competitive firm wants higher profits and has decided to raise the price of its product. As an economic consultant you would advise them to
not do this since they would lose all of their sales to competitors.
The demand curve for the perfectly competitive firm is
perfectly elastic
The demand curve for the perfectly competitive industry is
downward sloping
The decision making process for the perfectly competitive firm boils down to
deciding how much to produce
Profits are maximized for the perfectly competitive firm when the firm produces the quantity where
MC= MR
P= MC
Total revenue exceeds total cost
The perfect competitor should produce the quantity where
marginal revenue equals total cost
In a perfectly competitive market, if P > ATC in the short run, there is apt to be
entry of new firms in the market
