UNIT 6: PERFECT COMP MODEL Flashcards
1
Q
What is perfect competition?
A
It is a model used to understand relationships between components of the model.
It helps make predictions.
2
Q
What are the key characteristics of a perfect competition model? M.F.P
A
- Many buyers and sellers each with a small market share
- Free entry + exit
- Product is standardize across sellers
3
Q
What is marginal revenue?
A
The change in total revenue generated by an additional unit of output
4
Q
How do you maximize profit?
A
To maximize profit, you must choose Quantity where
marginal revenue = marginal cost
5
Q
TR > TC = ?
TR = TC = ?
TR < TC = ?
A
Profit
Break Even
Loss
