Perfect Competition Flashcards
1
Q
Perfectly Competitive Market
A
All participants are price-takers
2
Q
Perfectly Competitive Industry
A
All producers are price-takers
3
Q
Market share
A
Fraction of the total industry output accounted for by that producer’s output
4
Q
Producer market share in perfectly competitive industry
A
No large
5
Q
Standardized Product
A
Consumers look at the same
6
Q
2 necessities for Perfect Competition
A
- Small market share
- Standardized Product
7
Q
Free entry and exit
A
In perfectly competitive industry
New producers can easily enter and exit
8
Q
Marginal Revenue =
A
Change in Total Cost
——————————
Change in Output
9
Q
Optimal Output Rule
A
Profit is maxed at MR = MC
10
Q
Profitable
Breaks even
Incurs a loss
A
TR > TC
TR = TC
TR < TC
11
Q
Produces in short run / maybe / shut down
A
Price > Min. AVC
Price = Min. AVC
Price < Min.AVC
