AP ECON 14 (principles of economics)

competitive market

a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker

average revenue

total revenue divided by quantity

marginal revenue

the change in total revenue from an additional unit sold

sunk cost

a cost that has alreadt been comnmited and cannot be recovered (ex

TR < TC

When you should exit a market based on Total cost

TR/Q < TC/Q

When you should exit a market based on Total cost per quantity

P < ATC

When you should exit a market based on average total cost

Profit = TR - TC

Profit formula

P > ATC

When you should enter a market

Profit = (P - ATC) x Q

What is the profit formula in a competitive market

Allocative efficiency

When price equals marginal cost, that is

Productive efficiency

When price is equal to minimum ATC curve

AR < ATC

When do you have a loss

Shutdown

Short run decision to not produce anything because of market conditions, do at P<AVC or profit less than fixed cost

Exit

Long term decision to leave the market entirely, supply curve shifts left

zero-profit equilibrium

In the long run, the perfectly competitive market firms hit equilibrium and earn zero economic profit

Horizontal

What will the supply curve be if all firms have identical costs

Upward sloping

What will the supply curve be if firms have different costs and Costs rise as firms enter the markets

Downward sloping

What will the supply curve be if Firms experience lower costs as the industry expands

inverse

What is the relationship between marginal costs and average variable cost

stays the same

What happens to quantity if fixed costs increase

per-unit

What causes the MC, AVC, and ATC curves to shift

lump sum

what causes the AFC and ATC curve to shift