Principles of Microeconomics: Perfectly Competitive Markets

These flashcards cover the key concepts and terminology associated with perfectly competitive markets as discussed in the lecture notes.

Perfect Competition

A market structure characterized by many firms producing a homogeneous product where no single firm can affect the market price.

Price-Taker

A firm that must accept the market price as given because its own production is insignificant compared to the market size.

Market Power

The ability of a firm to influence the price of a product through its strategic behavior.

Monopsony Power

The market power held by buyers in situations where they can negotiate better prices due to a concentration of demand.

Marginal Revenue (MR)

The additional revenue earned from selling one more unit of a good, which remains constant in perfect competition.

Marginal Cost (MC)

The cost of producing one additional unit of a good, which firms will equal to the market price to maximize profits.

Economic Nirvana

A concept introduced by economist Harold Demsetz to describe an ideal perfectly competitive market that is practically unattainable.

Production Decision

The choice made by a firm regarding the quantity of output to produce based on maximizing profit.

Total Revenue (TR)

The total income received from selling a given quantity of goods, calculated as price per unit times the number of units sold.

Total Cost (TC)

The total economic cost of production, comprising both fixed and variable costs.

Positive Profit

A situation where total revenue exceeds total cost, leading to a profit for firms.

Negative Profit

A scenario where total costs exceed total revenue, resulting in a financial loss for firms.

Zero Profit

A condition where total revenue equals total cost, resulting in neither profit nor loss for firms.