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perfect competition
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a market structure in which the decisions of individual buyers and sellers have no effect on market price
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perfectly competitive firm
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a firm that is such a small part of the total industry that it cannot affect the price of the product it sells
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price taker
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a perfectly competitive firm that must take the price of its product as given because the firm cannot influence its price
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total revenues
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the price per unit times the total quantity sold
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profit-maximizing rate of production
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the rate of production that maximizes total profits, or the difference between total revenues and total costs. Also, it is the rate of production at which the marginal revenue equals marginal cost
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marginal revenue
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the change in toal revenues resulting from a one-unit change in output (and sale) of the product in question
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short-run break-even price
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the price at which a firm's total revenues equal its total costs. At the break-even price, the firm is just making a normal rate of return on its capital investment
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short-run shutdown price
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the price that covers average variable costs. It occus just below the intersection of the marginal cost curve and the average variable cost curve
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industry supply curve
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the set of points showing the minimum prices at which given quantities will be forthcoming; also called the market supply curve
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signals
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compact ways of conveying to economic decision makers information needed to make decisions. An effective signal not only conveys information but also provides the incentive to react appropriately. Economic profits and economic losses are such signals
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long-run industry supply curve
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a market supply curve showing the relationship between prices and quantities after firms have been allowed the time to enter into or exit from an industry, depending on whether there have been positive or negative economic profits
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constant-cost industry
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an industry whose total output can be increased in the long run without an increase in input prices. Its long-run supply curve is horizontal
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increasing-cost industry
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an industry in which a long-run increase in industry output is accompanied by an increase in input prices, such that the long-run industry supply curve slopes upward
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decreasing-cost industry
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an industry in which an increase in output in the long run leads to a reduction in input prices, such that the long-run industry supply curve slopes downward
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marginal cost pricing
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A system of pricing in which the price charged is equal to the opportunity cost to society of producing one more unit of the good or service in question. The opportunity cost is the marginal cost to society.
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