Term
| perfectly competitive market |
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Definition
| setting in which both buyers and sellers have absoultely no effect on price pg 497 |
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Term
| Three factors of a perfectly competitive market |
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Definition
1. absence of transaction costs 2. product homogeneity 3. a large number of sellers pg 497 |
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Term
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Definition
the sum of the demands of all the individual consumers pg 498 |
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Term
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Definition
| the horizontal sum of the individual demand curves |
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Term
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Definition
the sum of all te individual seller's suplies pg 500 |
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Term
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Definition
the horizontal sum of the individual supply curves pg 500 |
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Term
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Definition
an invinite number of firms can produce a good in the long run in markets where technology is freely available to anyone page 503 |
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Term
| Three properties of Long-Run Competitive Equilibrium with Free Entry |
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Definition
1. the equilibrium price must equal ACmin 2. Firms must earn zero profit 3. Each active firm must produce at its efficient scale of production page 506 |
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Term
| general equilibrium effect |
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Definition
the market we are stdying and the markets for its inputs must all be in equilibrium page 514 |
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Term
| aggregate surplus AKA total surplus or social surplus |
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Definition
the total benefit from consumption less teh total avoidable cost of production page 515 |
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Term
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Definition
a reduction in aggregate suprlus below its maximum possible value page 526 |
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Term
| (aggregate) consumer surplus |
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Definition
| the sum of consumers' total willingness to pay less their total expenditure |
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Term
| (aggregate) producer surplus |
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Definition
sum of the individual firms' producer surpluses, which equals the sum of firms' revenues less their avoidable costs pg 528 |
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