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Perfect Competition & the Supply Curve
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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