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Perfectly competitive market
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Unable to control price of products and they sell identical items
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If a perfectly competitive firm wants to raise the price of the good, then...
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it won't sell anything because consumers have other places to go.
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Price Taker
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When a business charges the same amount as everyone else in a perfectly competitive market. (unable to change the price)
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Oligopolies
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when there are only a few businesses in an industry, such as computers and automobiles.
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Monopolistic Competition
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When there is a large number of businesses selling different products, such as clothing stores and restaurants.
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in a perfectly competitive market, if a person has the best egg they have ever had, then the market price will be...
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unaffected, because one individual is not able to change the market price
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The demand curve for one individual business in a perfectly competitive market is...
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Horizontal
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Profit
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Total Revenue minus Total Cost
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Average Revenue
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Total revenue divided by quantity
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in a perfectly competitive market, the average revenue is always equal to...
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Market price
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Marginal Revenue formula
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Change in total revenue divided by change in quantity
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Marginal Revenue Definition
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Change in total revenue resulting from selling one more product.
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In a perfectly competitive market, the market price always equals...
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marginal revenue and average revenue, this is because no matter how much you sell, you are always going to sell at the same price. '/]
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If marginal cost is greater than marginal revenue, then we know we should...
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stop producing because we aren't making a profit.
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in order to maximize our profit in a perfectly competitive market, we know that we need...
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The marginal revenue to equal the marginal cost.
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If ATC is above price in a perfectly competitive market curve, then we know that they are...
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Experiencing a loss
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If ATC is below price in a perfectly competitive market curve, then we know that they are...
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Making a profit
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In the short run, if a firm is experiencing a loss, they can either...
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Continue to produce or shut down temporarily.
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A business should treat their sunk costs as______ to his short-decision making
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irrelevant, because he can't get them back now.
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If a business is thinking about shutting down in the short run, then we know that the fixed cost is also considered to be a ______ cost
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Sunk cost, because they can't get it back and have to pay it, such as paying a monthly lease while shutting down temporarirly
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For any business, whether total revenue is greater or less than ______ cost is the key to determine whether or not the business should continue running in the short run
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Variable cost
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Shutdown Point
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the lowest point on a businesses average variable cost curve, if the price falls below this point, then the business should shut down in the short run.
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MRDARP
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MR=D=AR=P
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Market price is also the same thing as...
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Marginal revenue
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We know that if price falls below average variable cost, then we should...
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Shutdown
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P=
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Market Price.
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A business always maximizes profit when Marginal revenue = ???
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profit is maximized when marginal revenue equals marginal cost
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In a perfectly competitive market, prices ALWAYS equals...
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always equals marginal revenue
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What are the three characteristics of perfectly competitive markets
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they have many buyers and sellers, sell identical items, and there are NO barriers for firms entering the market.
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Why is the demand curve faced by one firm is horizontal?
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Because price always equals marginal revenue.
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When deciding whether or not to continue to producing or shut down, we know that if...
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The firms total revenue is greater than its variable cost then it should continue to produce no matter how big or small its fixed cost is.
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In a perfectly competitive market, the marginal cost curve is also its supply curve only when...
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prices are at or above average variable cost.
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The point where MC crosses MR, we can calculate profit or loss by...
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finding the area between the intersection of MC and ATC.
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If P < AVC then we should...
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Shut down in the short run
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IF ATC IS ABOVE THE GRAPH THEN WE KNOW THAT THE FIRM IS EXPERIENCING...
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A LOSS!!!
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