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Perfect Competition
A market structure where many buyers and sellers trade identical products, so that no single buyer or seller can influence market price.
Price Taker
A firm that must accept the market price as given and has no power to influence it.
Market Demand Curve (DD)
The total demand for a good or service in a market.
Individual Demand Curve (dd)
The demand curve that represents the quantity demanded by a single firm at various prices.
Marginal Revenue (MR)
The additional revenue gained from selling one more unit of a product.
Profit-maximizing Output
The level of output at which a firm maximizes its profits, occurring where MR = MC.
Average Total Cost (ATC)
The total cost divided by the quantity of output produced.
Short-run Equilibrium
A market condition in which firms make decisions based on currently available resources and conditions.
Long-run Equilibrium
A market condition where firms can enter and exit freely, leading to zero economic profits.
Economic Profits
Profits that exceed the opportunity costs of resources; profits above normal profit.
Barriers to Entry
Obstacles that make it difficult for new competitors to enter a market.
Perfectly Elastic Demand Curve
A demand curve that is horizontal at the market price; firms can sell any quantity at that price without affecting it.
Shutdown Point
The point at which total revenue is less than total variable costs, leading a firm to cease production in the short run.
Average Variable Cost (AVC)
Total variable costs divided by the quantity of output produced.
Total Revenue (TR)
The total income a firm receives from selling its products, calculated as price times quantity sold.
Total Costs (TC)
The sum of fixed and variable costs incurred by a firm in production.
Supply Curve
A graph showing the relationship between the price of a good and the quantity supplied.
Market Price
The price at which goods are sold in a competitive market.
Long-run Industry Supply Curve
The relationship between price and quantity supplied in the long run, considering entry and exit of firms.
Constant Cost Industry
An industry where the long-run supply curve is horizontal, indicating that costs do not change as firms enter or exit.
Economic Loss
When total revenue is less than total cost, indicating that the firm is not covering its costs.
Normal Profit
The minimum level of profit necessary for a company to remain competitive in the market.
Implicit Costs
Costs that represent lost opportunities for income, not internally accounted for as cash outflows.
Explicit Costs
Direct, out-of-pocket payments for expenses in the production process.
Market Supply Curve
The sum of the supply curves of all firms in the market, showing the total quantity supplied at various price levels.
Long-run Adjustment
The process through which firms enter or exit an industry based on prevailing economic profits or losses.
Constant Cost Industry
An industry where firms can enter or exit without affecting the price of the product.
Industry Demand Curve
The total demand for a product by all consumers in an economy.
Average Revenue (AR)
Total revenue per unit sold; in perfect competition, AR equals the market price.
Short-run Supply Curve
A curve that shows the supply a firm is willing and able to provide at different prices in the short run.
Marginal Cost (MC)
The additional cost incurred from producing one more unit of output.
Entry and Exit Conditions
Circumstances under which firms will decide to enter or exit an industry based on profitability.
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