Perfect Competition Review || Chapter 9

Firms’ goal is to maximize profit. They do this in two ways, by maximizing revenue and minimizing cost. Recall that profit = revenue - cost

(Firms’ goal is to maximize TERM. They do this in two ways, by TERMING revenue and TERMING cost. Recall that Profit = revenue - cost)

ATC = total cost / quantity, with ATC being average total cost

(ATC = term term / term, with ATC being term term term)

AFC= fixed cost / quantity, with AFC being average fixed cost

(AFC= TERM TERM/ TERM, with AFC being term term term)

AVC = variable cost/quantity, with AVC being average variable cost

(AVC = term term/term, with AVC being term term term).

MC= ^Total cost / ^ quantity with ^ being “change in” and MC being marginal cost.

(MC = symTerm / symTerm, with ^ being “change in” and MC being term term).

Perfect competition describes the most competitive type of market. It is characterized by many firms and many consumers, a homogenous product, and low barriers to entry. Firms are price takers and make zero profit.

(Term term describes the term competitive type of market. It is characterized by term firms and term consumers, a term product, and term barriers to entry. Firms are price terms and make term profit.)

Monopolistic competition describes a somewhat competitive market. It is characterized by few to many firms, with its defining feature being product differentiation as a pricing method— i.e the products are the same, but firms try to market theirs as “better” — and low barriers to entry.

(Term term describes a somewhat competitive market. It is characterized by term to term firms, with its defining feature being term term as a pricing method — i.e, the products are the same, but firms try to market theirs as “Better”— and term barriers to entry. )

Oligopoly describes a somewhat noncompetitive type of market. It is characterized by significant barriers to entry, and as a result, by few firms that are often colluding in cartels to affect the price and gain more market power.

(Term describes a somewhat noncompetitive type of market. It is characterized by term barriers to entry, and as a result, by term firms that are often terming in cartels to affect the price and gain more market term. )

Monopoly describes the most competitive type of market. It is characterized by one firm, a unique product, and an extremely high barrier to entry. Because of their disproportionate market power to set prices for products, firms in this type of market are known as price makers.

(Term describes the term competitive type of market. It is characterized by term firm, a term product, and an termly term barrier to entry. Because of their disproportionate market power to set prices for products, firms in this type of market are known as TERM TERMS.)

Monopolistic market

Taylor Swift, public universities, hospitals, and utility companies are examples of firms in what type of market?

Markets:

Perfectly competitive market

Monopolistically competitive market

Oligopolistic market

Monopolistic market

oligopolistic market

drug cartels, OPEC, car manufacturers are examples of firms in what type of market?

Markets:

Perfectly competitive market

Monopolistically competitive market

Oligopolistic market

Monopolistic market

perfectly competitive market

Raw goods generally exist in what type of market?

Markets:

Perfectly competitive market

Monopolistically competitive market

Oligopolistic market

Monopolistic market

monopolistically competitive markets

Gyms, clothing stores, fast casual dining (Olive Garden, e.g), “brands” are examples of firms in what type of market?

Markets:

Perfectly competitive market

Monopolistically competitive market

Oligopolistic market

Monopolistic market

In perfect competition, the relationship between marginal revenue and profit is as follows: MR = P. Marginal revenue is how much money is collected with each additional product sold.

(In perfect competition, the relationship between marginal term and profit is as follows: TT =/</> T. Term revenue is how much money is collected with each term product sold.)

Profit maximization function: MR = MC. MR is the marginal revenue, or the financial benefit received from the next sale. MC is the marginal cost, the financial cost incurred from the next sale. When MR > MC, each additional sale leads to more benefits received than costs incurred. When MR < MC, each additional sale leads to more costs incurred than benefits received.

(Profit maximization function: TT =/>/< TT. MR is the term term, or the financial benefit received from the next sale, MC is the term term, the financial cost incurred from the next sale. When MR [</>] MC, each additional sale leads to more benefits received than costs incurred. When MR [</>] MC, each additional sale leads to more costs incurred than benefits received.

The supply curve comes from the marginal cost curve. It shows the cost of each additional unit when the industry is profitable.

(The supply curve comes from the term term curve. It shows the cost of each additional unit when the industry is profitable.)

Sunk costs are unrecoverable costs that have been incurred in the past. Optimal decisions are made when both marginal cost and marginal revenue are considered. In other words, after unrecoverable costs are incurred, it is better to “cut one’s losses” and cease that course of action before more things are lost. Continuing to incur those costs, on the other hand, is called the “sunk cost fallacy.”

(TERM TERMS are unrecoverable costs that have been incurred in the past. Optimal decisions are made when both marginal term and marginal term are considered. In other words, after unrecoverable costs are incurred, it is better to “cut one’s losses” and cease that course of action before more things are lost. Continuing to incur those costs, on the other hand, is called the “term term term”.)