Perfect comp. Flashcards
What is market structure?
Important features, of a market, such as the number of firms, product uniformity across firms, firm’s ease of entry and exit, and forms of competition
What is perfect competition?
A market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run
What is a price taker?
A firm that faces a given market price and whose quantity supplied has no effect on that price; a perfectly competitive firm that decides to produce must accept, or “take,” the market price
Marginal Revenue vs. Price
MR=P
What is TR (Total Revenue)?
TR = q * p
What is MC (Marginal Cost)?
MC = change in TC/ change in q
What is ATC (Average Total Cost)?
ATC = TC/q
How do you find an Economic profit or loss?
TR-TC
Golden rule of profit maximization is…
To maximize profit or minimize loss, a firm should produce the quantity at which MR = MC
Average Revenue is…
AR = TR/q; AR = Market Price
Equation for maximizing profit?
Profit = Q *(P-ATC); choose Q where MR=MC
When trying to maximize profit, when should you produce, not produce, or optimal?
expand when P>MC
stop before MC>P
optimal = P = MC
When should a business, make a profit, make a loss, or shutdown?
profit = P > ATC loss = P > AVC but P < ATC shutdown = P < AVC
How do you find TC?
TC = TFC + TVC
How do you find Average Fixed Costs (AFC)?
TFC/Q
