Microeconomics Chapter 9: Perfect Competition Flashcards

Vocabulary flashcards covering core market structures, firm decisions, cost principles, and supply curves from Chapter 9 Perfect Competition.

Perfectly competitive market

A market with many sellers and buyers of a homogeneous product and no barriers to entry.

Price taker

A buyer or seller that takes the market price as given.

Firm-specific demand curve

A curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell.

Monopoly

A market structure where a single firm serves the entire market, with barriers to entry preventing new firms entering and breaking the monopoly.

Monopolistic Competition

A market structure where many firms serve the market with nonidentical products, and firms can enter and exit the market.

Oligopoly

A market structure where only a few firms are in the market, because of economies of scale or because government policies limit the number of firms.

Marginal revenue

The change in total revenue from selling one more unit of output.

Break-even price

The price at which economic profit is zero; price equals average total cost.

Shut-down price

The price at which the firm is indifferent between operating and shutting down; equal to the minimum average variable cost.

Sunk cost

A cost that a firm has already paid or committed to pay, so it cannot be recovered.

Short-run supply curve

A curve showing the relationship between the market price of a product and the quantity of output supplied by a firm in the short run.

Short-run market supply curve

A curve showing the relationship between the market price and quantity supplied in the short run.

Long-run market supply curve

A curve showing the relationship between the market price and quantity supplied in the long run.

Increasing-cost industry

An industry in which the average cost of production increases as the total output of the industry increases; the long-run supply curve is positively sloped.

Constant-cost industry

An industry in which the average cost of production is constant; the long-run supply curve is horizontal.