Perfect Competition Flashcards
Define market share
When both sellers and buyers are price takers - their actions have no effect on price
What is a standardised product?
Consumers regard different sellers’ products as equivalent
Define free entry and exit
New producers can easily enter into an industry and existing producers can easily leave that industry
How is total revenue calculated?
Price x Quantity
How is profit calculated?
Total Revenue - Total Cost
What is the optimal output rule?
Profit is maximised by producing the quantity of output at which the marginal revenue of the last unit produced is equal to its marginal cost
What happens to the firm is the total revenue is higher than total cost?
The firm is profitable
What happens to the firm if the total revenue is equal to the total cost?
The firm breaks even
What happens to the firm if the total revenue is lower than the total cost?
The firm incurs a loss
Define shut down price
Minimum average variable cost
