Week 5- Perfect Competition Flashcards Preview

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Flashcards in Week 5- Perfect Competition Deck (13):
1

Perfectly competitive firm known as___

Price taker.

2

Profit=

Total Revenue – Total cost
= (Price)(Quantity produced) – (Average cost)(Quantity produced)

3

Marginal revenue=

change in total revenue/ change in quantity.

4

Marginal cost=

change in total cost/ change in quantity

5

If Price > ATC

Firms earn profit.

6

If Price = ATC

Firm earns 0 profit.

7

If Price

Firm loss.

8

If Price

Firm shuts down.

9

If Price = minimum average variable cost___

Firm stays in business.

10

Shutdown point___

where marginal cost curve intersects average cost curve at the minimum point of AVC;
if price is below this point, firm shut down immediately.

11

- Constant cost industry

whenever there’s an increase in market demand and price, supply curve shifts to the right

12

- Increasing cost industry

companies may have to deal w/ limited inputs such as skilled labor. As demand of these workers rise, wages rise and this increase cost of production. Supply curve will be more inelastic.

13

- Decrease cost industry

, old and new firms experience lower costs of production, makes 0 profit level intersect at lower price than before. Here the industry and all the firms are experiencing falling average total costs.