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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
Note 
Flashcard (24)