Market Structures and Firm Supply Functions

Flashcards covering definitions and concepts related to market structures, production decisions, and supply functions in economics.

Perfect Competition

A market structure characterized by many firms offering homogeneous goods with no market power.

Monopoly

A market structure where a single firm dominates the market.

Imperfect Competition

A market structure with several firms, each aware that their sales depend on their pricing and actions.

Oligopoly

A market structure with a few firms where each must consider rivals' responses to its actions.

Monopolistic Competition

A market structure with many firms having market power due to product differentiation.

Profit Maximization

The production criterion under perfect competition where firms charge a price that equals marginal cost.

Consumer Surplus (V-P)

The difference between the value of a product to the average consumer and its price.

Profit (π)

The difference between the price and cost (P-C) of a product.

Long Run Supply Function

Shows that in the long run, firms in perfect competition have a profit of zero due to free entry and exit.

Minimum Efficient Scale (MES)

The smallest output level at which long-run average costs are minimized.

Supply Elasticity

A characteristic of the market supply in the long run, which becomes perfectly elastic in perfect competition.