Chap 8 (Quiz 5) Flashcards
Market Structure
The conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of prod that are sold
Perfect competition
Each firm faces many competitors that sell identical products
Price taker
A firm in a perfectly competitive market that must take the prevailing market price as given
Fundamental rule of profit maxim.
Can produce fractions rather than just integers, then prod the lvl of output where MC=MR
Marginal Revenue
The additional revenue gained from selling 1 more unit
Shutdown point/price
Lvl of output where marginal cost curve intersects the AVC curve at the minimum point of AVC, if price below this point; firm shut down.
Accounting profit
Total revenues minus explicit costs, including depreciation
Economic profit
Total revenues minus total costs (ex + im cost)
Explicit costs
Out of pocket costs for a firm. Wages, salaries, rent, or materials.
Implicit costs
Opp cost of resources already owned by the firm and used in business. Expanding factory onto land already owned.
Entry
The long run process of firms entering an industry in response to industry profits
Exit
The long run process of firms reducing prod and shutting down in response to industry losses
Long run equilibrium
Where all firms earn 0 economic profits producing the output lvl where P= MR= MC and P= AC
Increasing cost industry
Cost rises as more is made- LRS slope up
Constant cost industry
Cost stays the same as more is made- LRS slopes straight across
Decreasing cost industry
Cost falls as more is made - LRS slopes down
