question
perfect competition
answer
a market structure in which a large number of firms all produce the same product and all firms are price takers
question
perfectly elastic demand
answer
horizontal demand facing a single, price-taking firm in a competitive market (|e|= -infinity)
question
shut down
answer
a firm produces zero output in the short run but must still pay for fixed inputs
question
profit margin
answer
P-ATC
question
average profit
answer
total profit / quantity
equivalent to profit margin when all units sell for the same price
equivalent to profit margin when all units sell for the same price
question
break-even points
answer
output levels where P=ATC and profit = zero
question
shutdown price
answer
the price below which a firm shuts down in the SR (minimum AVC)
question
long-run competitive equilibrium
answer
condition in which all firms are producing where P=LMC and economic profits are zero
question
increasing-cost industry
answer
an industry in which input prices rise as all firms in the industry expand output
question
constant-cost industry
answer
input prices remain constant as all firms expand output
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