perfect competition Flashcards
what is perfect competition
its when many small firms are selling an identical good making them perfect substitutes for each other and there are a large amount of buyers, easy entry or exit the market and consumers are well informed about the product
the firms are price takers and are the bitch of the market no control of the price
what does the demand curve look like for a firm in perfect competition
the demand curve is elastic horizontal on the market price since they have no control of the price.
what is the demand curve also equal to
its also equal to the marginal revenue
what is marginal revenue
its the additional revenue gained from selling one extra unit
how would you determine what the profit maximizing quantity
when the marginal cost curve intercepts the demand curve ( marginal revenue curve)
how do you find total revenue
you multiply the quantity by the price looking at a graph its the box formed by maxing a line for the y value and the x value of
how do you find the total cost
its the same as revenue but instead you make a box using the same x value just the y value changes cuz atc is lower then the mr mc intercept
how do you find the total cost
its the area that is left after you find the total cost area
how would you know if the firm is making a loss
if the atc curve is above the MR (demand) line
how do you know if the firm is making a profit
if the atc curve is below the MR demand line
how do you know if the frim is breaking even
if the atc curve is intercepting with the MR and MC line
how do you calculate economic profit
total revenue minus total cost ( total cost is including opportunity cost)
what is marginal analysis
its the principle that profit is maximized at the level where marginal benefit equals marginal cost
