Ch 9 - Competitive Markets for Goods and Services Flashcards
Perfect competition is….
A model of the market based on the assumption that a large number of firms produce identical goods consumed by a large number of buyers.
What are price takers?
Price takers ate individuals or firms that takes the market price as given and has no ability to influence price.
What are identical goods?
G&S that, in a perfectly competitive market, one unit of which cannot be differentiated from any other on any basis.
What assumptions are to be made of perfectly competitive markets?
- There are identical goods
- There are a large number of buyers an sellers
- There is ease of entry and exit
- There is complete information
Each firm in a perfectly competitive market is a price ______.
Taker
A firms total revenue is found by…
Multiplying its output by the price at which it sells that output.
TR = P * R
Marginal revenue is…
The increase in total revenue from a 1-unit increase in quantity.
Average revenue is…
Total revenue divided by quantity.
AR = TR/Q
What is economic profit per unit?
The difference between price and average total cost.
What is economic loss?
The amount by which its total cost exceeds its total revenue.
The minimum level of average variable cost, which occurs at the intersection of the marginal cost curve and the average variable cost curve, is called…
The shutdown point.
Explicit costs include
Charges that must be paid for factors of production such as labor and capital, together with an estimate of depreciation.
What is Accounting Profit
Profit computed using only explicit costs.
A cost that is included in the economic concept of opportunity cost, but is not an explicit cost, is called
An implicit cost
When expansion of the industry for not affect the prices of factors of production, it is called…
A constant-cost industry
