Econ quiz 3

P > ATC

profit

P<ATC

loss

p=ATC

break even

perfect competition charateristic

1) many buyers and sellers (have no control over market)

2) everyone is a price taker accept the price that given in the market

3) homogeneous product - all firms in an industry sell a good that is absolutely identical in every way

4) perfect information- all buyers and and sellers have all the info necessary to make optimal decisions

5) easy entry and exit - all buyers and sellers can easily enter/exit market as desired

shut down rule

guides a firm in the short run when it has a loss as to when it should stay open or shut down

in the short run you should stay open if…

p>AVC

in the short run you should shut down if…

P<AVC

optimal purchase rule

continue if MU≥Price

optimal input rule

MRP≥cost of input