EKN Chapter 7 Flashcards
Pure competition
A market structure in which a very large number of firms sells a standardized product, into which entry is very easy, in which the individual seller has no control over the product price, and in which there is no non-price competition; a market characterized by a very large number of buyers and sellers.
Pure monopoly
A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which non-price competition may or may not be found.
Monopolistic competition
A market structure in which many firms sell a differentiated product, into which entry is relatively easy, in which the firm has some control over its product price, and in which there is considerable non-price competition.
Oligopoly
A market structure in which a few firms sell either a standardized of differentiated product, into which entry is difficult, in which a firm has limited control over product price because of mutual interdependence, and in which there is typically non-price competition.
Imperfect competition
All market structures except pure competition; includes monopoly, monopolistic competition and oligopoly.
Price taker
A seller (or buyer) of a product or resource that is unable to affect the price at which a product or resource sells by changing the amount it sells (or buys).
Average revenue
Total revenue created from the sale of a product divided by the quantity of the product sold (demanded); equal to the price at which the product is sold when all units of the product are sold at the same price.
Total revenue
The total number of rands received by a firm (or firms) from the sale of a product; equal to the total expenditures for the product produced by the firm; equal to the quantity sold (demanded) multiplied by the price at which it sold.
Marginal revenue
The change in total revenue that results from the sale of one additional unit of a firm’s product; equal to the change in total revenue divided by the change in total quantity of the product sold.
Barriers to entry
Anything that artificially prevents the entry of firms into an industry.
Break-even point
An output a which a firm makes normal profit (total revenue=total cost) but not an economic profit.
MR=MC rule
The principle that a firm will maximize its profits (or minimize its losses) by producing the output at which marginal revenue and marginal cost are equal, provided product price is equal to or greater than average variable cost.
Short-run supply curve
The supply curve that shows the quantity of a product a firm in a purely competitive industry will offer to sell at various prices in the short run; the portion of the short-run marginal cost curve that lies above its average variable cost curve.
