Market equilibrium: perfect competition Flashcards
1
Q
Firms in a perfect competition market are:
A
Price-taking
2
Q
What are common characteristics of perfect competition markets?
A
- Homogenous products
- Consumers are aware of all suppliers and informed about prices
- Consumers can trade with each firm at no additional cost
- Free entry and exit
3
Q
What does Pi mean?
A
Profit
4
Q
The long run shutdown rule is that a firm should shut down if:
A
pq < C(q)
p
5
Q
The short run shutdown rule is that a firm should shut down if:
A
pq
6
Q
The SR market supply curve is flat if:
A
- Firms can freely enter and exit
- There are unlimited number of firms with identical costs
- Input prices remain constant
