Chapter 13 Flashcards
The Competitive Market
-The market many buyers and sellers
-Goods offered for sale are largely the same
Perfectly Competitive Market
Firms can enter or exit the market
Profit
Total Revenue - Total Cost
Average Revenue
Total Revenue / Quantity
Marginal Revenue
Change in Total Revenue / Quantity
For competitive firms, marginal revenue equals the price of the good.
Marginal Cost increases as the Output ________
Rises
Rules for Profit Maximization
-If marginal revenue exceeds marginal cost, the firm should increase output to increase profit.
-If marginal revenue does not exceed marginal cost, the firm should decrease output to increase profit.
-At the profit maximization level, marginal revenue and marginal costs are equal.
The firm’s ________________ determines how much the firm is willing to supply at any price, is the competitive’s firm supply curve.
Marginal-cost curve
A firm will shut temporarily if the revenue that it would get from producing is less that ______________
Variable costs
The firm ignores fixed cost because they’re considered ______________
Sunk costs
Firm would shut down if Price is less than
________________
Average Variable Cost
The competitive firm long-run supply curve is the portion of its marginal-cost curve that lies _________________________________
Above average total cost curve
Competitive Firm Profit
(P-ATC)*Q
If price is above ATC, firm is
Profitable
If price is below ATC, firm is
Not profitable, losses
In the long run, firms cannot quickly enter or exit the market
TRUE
Market Supply Curve
Sum of the quantities supplied by each firm in the market at each price
In the long run, firms are able to exit or enter the market
TRUE
-Firms in the competitive market are making __________
0 profit
Long run market supply curve must be horizontal,
Perfectly elastic
The supply decisions are based on marginal analysis. Profit maximizing firms that supply goods in competitive markets.
TRUE
