Chapter 9: Firms in Competitive Markets Flashcards
1
Q
Price Taker
A
takes (accepts) the price determined by overall supply/demand conditions that regulate the market. Firms have no control over market price. p277
2
Q
Characteristics of a competitive market
A
- many sellers
- similar products
- every firm is small
- free entry and exit to market
- price taking
3
Q
marginal revenue
A
the change in total revenue a firm receives when it produces one more unit of output (Q) p281
4
Q
profit- maximizing rule
A
states that profit maximization occurs when a firm expands output until marginal revenue is equal to marginal cost
MR>MC more Q is beneficial
MR
5
Q
Signal
A
of profit and losses convey information about the profitability of various markets p293
