Microeconomics - Chapter 12 (Not Finished)

Perfect Competition & the Supply Curve

what is perfect competition

market participants, both consumers and producers, are price-takers.

what is market share

the fraction of the total industry output accounted for by that producer’s output

do sellers and buyers have an effect on price

what is a standardized product

consumers regard different sellers’ products as the same

which of the following markets is likely to be the most competitive

perfectly competitive industries are characterized by

free entry and exit

what does free entry and exit mean

new producers can easily enter into an industry, and existing producers can easily leave that industry

how is total revenue calculated

price x quantity sold (TR= P x Q)

how is profit calculated

profit = TR-TC (total revenue - total cost)

what is the profit-maximizing principle of marginal analysis

the optimal amount of an activity is the level at which marginal benefit = marginal cost

def of marginal revenue

change in total revenue generated by an additional unit of output

equation of marginal revenue

MR= change in TR/ change in Q (output produced)

what is the optimal output rule

profit is maximized by producing the quantity of output at which the marginal revenue of the last unit produced is = to marginal cost