Perfect Competition

Question 1

Maximizing profits in the short run

Answer 1

MR=MC

Question 2

Theory of perfect competition

Answer 2

-all firms must have identical product
-consumers and producers know the nature of the market
-many buyers and sellers
-freedom of entry and exit
-firms are price takers and have no influence over cost

Question 3

In a perfectly competitive industry:

Answer 3

P=MR=MC

Question 4

economic profit =

Answer 4

revenue- cost
r-c

Question 5

To maximize profits, a firm must (2)

Answer 5

-Produce only if total revenue is greater than or equal to total variable cost
-choose quantity when marginal cost equals marginal revenue

Question 6

Maximizing profits in the long run
what does it maximize?

Answer 6

P=MC=AC
maximizes consumer and producer surplus

Question 7

produce surplus how to calculate

Answer 7

amount producers paid - amount willing to accept