Ch.12 Perfect Competition and the Supply Curve Flashcards
1
Q
conditions for perfect competition
A
- many producers, non has a large market share
- standardized product (commodity)
- free entry and exit (usually)
2
Q
optimal output rule
A
max profit when price is set where MR = MC
3
Q
to make a profit…
A
price > average total cost ATC
4
Q
short run decision
A
P > min average variable cost, produce
P = min AVC, produce
P
5
Q
Price must exceed ____ to make a profit
A
minimum ATC, the break even price
6
Q
in the long run equilibrium with perfect competition
A
- MC is same for all firms
- each firm has 0 economic profit
- efficient
7
Q
marginal revenue
A
revenue earned from selling one more of a good
8
Q
shut- down price
A
minimum average variable cost AVC
9
Q
in short run, firms ignore…
A
fixed costs
10
Q
break even price
A
minimum average total cost ATC
minimum cost output
11
Q
in the long run equilibrium with perfect competition
A
- MC is same for all firms
- each firm has 0 economic profit
- efficient, profit maximized
12
Q
short-run individual supply curve is equal to
A
MC curve at/above the shut-down price
