question
Assumptions of a Perfectly Competitive Market
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1. Many Buyers
2. Many Sellers
3. Homogenous Product
4. No barriers to market entry or exit
5. Perfect Information
6. Buyers and sellers are price takers
2. Many Sellers
3. Homogenous Product
4. No barriers to market entry or exit
5. Perfect Information
6. Buyers and sellers are price takers
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Buyers can buy only at market price or _______
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Above
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Sellers can sell only at market price or _______
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Below
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TR =
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P*Q
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MR =
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Change in TR
-------------------
Change in Q
-------------------
Change in Q
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In a Perfectly Competitive Market the Marginal Revenue is equal to the
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Equilibrium Price
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Profit Maximization ALWAYS occurs at
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MR = MC
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Profit = pi =
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TR - TC
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Shutdown Point
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Minimum of average variable cost
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Shutdown Price
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Price where minimum AVC occurs, or the price at which the firm is indifferent between operating and shutting down
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Shutdown Rule
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If price falls below minimum AVC then firm should shut down immediately
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The firms short-run supply curve is just the portion of the MC curve that lies above the ___________
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Minimum AVC
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Simplifying Assumption
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All sellers have same opportunity cost
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Constant Cost Industry
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An industry for which the prices of inputs such as labor and capital do not change as total output of the industry increases.
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In a perfectly competitive market new entries in the long-rub will eventually make the __________ zero
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economic profit
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Long Run Market Supply Curve
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A curve showing the relationship between market price and quantity supplied in the long-run (with entry and exit of firms)
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