Competitive markets Flashcards
1
Q
Competitive market characteristics
A
- Many buyers and sellers
- Free entry and exit in the long run
- Goods and services sold are similar
2
Q
Marginal Revenue
A
Change in Revenue/ Change in total quantity
3
Q
Topmost important point
A
Marginal Revenue = Price in competitive market
4
Q
Imp point
A
Marginal cost = Marginal revenue maximizes profit in a competitive market.
5
Q
Point
A
Competitive businesses have horizontal demand curves
6
Q
Shutdown
A
Short term leaving market
Shutdown price: min of AVC
7
Q
Exit
A
Leaving market forever(ig)
8
Q
When shutdown
A
TR < VC
9
Q
Sunk cost
A
Cost that cannot be recovered
10
Q
Imp point
A
You have to still pay fixed cost when shutdown
11
Q
When Exit
A
TR < TC
12
Q
Economic profit
A
(P-ATC)xQ
