Chapter 8 Flashcards
1
Q
Conditions for Perfect competition
A
Large number of small firms
Homogeneous products
Easy entry and exit
2
Q
Individual Firms Demand cruve
A
Demand curve is horizontal
3
Q
Marginal Revenue =
A
Price
4
Q
Maximize profit
A
MC = MR
5
Q
MR
A
increase output
6
Q
MR > MC = ? output
A
decrease output
7
Q
Keep producing as long as
A
Marginal revenue >= Marginal cost
8
Q
P > ATC, profit > 0
A
stay open
9
Q
P = ATC, profit = 0
A
stay open
10
Q
AVC
A
stay open
11
Q
P = MIN(SRAVC), profit
A
stay open (indiffence)
12
Q
P
A
shut down
13
Q
profit > ?
economic loss
A
-TFC
TFC
14
Q
Long run
profit > 0
A
Expansions of firm
Entry of new firms
Decrease of Price, Decrease of Profit
15
Q
Long run
profit
A
Down sizing of forms
Firms shutdown or exit
Increase Price, Increase Profit
