Term
What is the first characteristic of a perfectly competitive industry? --------------- |
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Definition
There are a large number of independently acting (No Collusion) buyers and sellers. ------------ |
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Term
What is the second characteristic of a perfectly competitive industry? ------------- |
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Definition
All goods have identical characteristics and are perfectly substitutible (Homogeneous). This means that there is no non-price competition. ------------ |
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Term
What is the third characteristic of a perfectly competitive industry? ------------------- |
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Definition
A seller that faces a single market price and can sell as much as it desires only at that price. (Firms are price takers) Meaning a single firm has no effect on market price. ------------------ |
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Term
What is the fourth characteristic of a perfectly competitively industry? ----------------- |
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Definition
Entry and exit into the industry are not prohibitively costly (Entry and exit are not prohibitively costly). ------------ |
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Term
Perfectly Competitive firms have what kind of demand because of the fact they are price takers? ------ |
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Definition
Perfectly elastic demand ---------- |
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Term
What is Total Revenue? --------- |
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Definition
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Term
What is Average Revenue? ------------- |
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Definition
Total Revenue Divided by Quantity ------------ |
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Term
What is Average Total Cost? ------------- |
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Definition
Total Cost Divided by Quanity ------ |
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Term
What is Product Price? -------------- |
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Definition
Average Revenue ------------ |
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Term
How do you calculate Marginal Revenue? ------------ |
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Definition
Change in Total Revenue Divided by Change in Quantity ------------------ |
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Term
How do you calculate Marginal Cost? ------------- |
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Definition
Change in Total Cost Divided by Change in Quantity ----------- |
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Term
What is Marginal Revenue? ------------- |
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Definition
The change in total revenue that results from selling one more unit of output. ------------- |
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Term
What is Marginal Cost? ----------------- |
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Definition
The change in total cost that results from buying one more unit of a product. ------------- |
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Term
Is price constant in a perfectly competitive industry? ----------------- |
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Definition
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Term
In a Perfectly competitive industry what does price equal? ------------ |
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Definition
Price equals average revenue, which also equals marginal revenue. -------------- |
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Term
What is the slope of total revenue? --------------- |
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Definition
Change in Total Revenue Divided by Change in Quantity -------------- |
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Term
The profit maximization condition in all firms, time frames, and market structures is what? ------------- |
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Definition
That marginal revenue equals marginal costs. ------------ |
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Term
Where total revenue is greater in excess than total cost is what? ----------------- |
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Definition
The profit maximizing output ------------ |
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Term
What is economic profit? ---------- |
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Definition
Total Revenue minus Total Cost -------------- |
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Term
A firm that is earning economic profit is called what? --------------- |
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Definition
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Term
What is the slope of total revenue? ------------- |
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Definition
Marginal Revenue ---------- |
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Term
What is the slope of total cost? ------------------ |
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Definition
Marginal Cost --------------- |
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Term
When the slope of total cost is equal to total revenue? ------------------- |
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Definition
Profit is being maximized. ------------ |
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Term
How do you calculate marginal costs? ---------------- |
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Definition
Change in total cost Divided by Change in Quantity ----------- |
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Term
What is a Break Even point? ----------- |
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Definition
Where total revenue equals total cost, in which there is no economic profit. ------- |
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Term
What is it called when a firm is suffering losses? ------- |
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Definition
It is in the red. ------------- |
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Term
What is Loss-Minimization? -------------- |
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Definition
To maximize profit by minimizing the excess of total cost over total revenue ------------------------- |
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Term
Where are economic decisions made? ----------- |
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Definition
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Term
If total fixed costs are greater than losses at the margin if they kept operating during the short run, what do they do? ----------------- |
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Definition
Keep operating, and hope they improve. -------------- |
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Term
When losses are greater than the total fixed costs, what must the firm do in the short run? ---------------- |
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Definition
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Term
Total revenue is only a linear positive line, during what? --------------- |
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Definition
The short run ---------------- |
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