Key terms - Perfect competition

Question 1

Marginal revenue

Answer 1

The change in total revenue that results from a one-unit increase in the quantity sold.

Question 2

Perfect competition

Answer 2

A market in which: many firms sell identical products to many buyers; there are no restrictions on entry; established firms have no advantage over new ones; sellers and buyers are well informed about prices.

Question 3

Price taker

Answer 3

A firm that cannot influence the market price because its production is an insignificant part of the total market.

Question 4

Short-run market supply curve

Answer 4

Shows the quantity supplied by all the firms in the market at each price when each firm’s plant and the number of firms in the market remain the same.

Question 5

Shutdown point

Answer 5

The price and quantity at which it is indifferent between producing and shutting down.

Question 6

Total revenue

Answer 6

Equals the price of its output multiplied by the quantity sold.