Market Structures in Microeconomics

This set of flashcards covers key terms and concepts from the lecture on Market Structures in Microeconomics.

Total Revenue (TR)

The total income a firm receives from selling its goods, calculated as price times quantity (TR = P · Q).

Marginal Revenue (MR)

The additional revenue generated from selling one more unit of a good (MR = ∆TR/∆Q).

Profit

The difference between total revenue and total cost, can be calculated as (P − ATC) · Q or TR − TC.

Average Revenue (AR)

Total revenue divided by the quantity of output produced (AR = TR/Q).

Total Cost (TC)

The total expenses incurred by a firm, comprising fixed costs (FC) and variable costs (VC).

Marginal Cost (MC)

The additional cost of producing one more unit of a good (MC = ∆TC/∆Q).

Perfect Competition

A market structure characterized by many buyers and sellers, identical products, no barriers to entry, and full information.

Shut Down Price (PSD)

The lowest price at which a firm will continue to produce, which occurs when total revenue is greater than variable costs.

Monopoly

A market structure featuring a single seller, a unique product, many buyers, and high barriers to entry.

Barriers to Entry

Factors that prevent new firms from entering a market, ensuring the presence of monopolies.

Economic Profit

Profit that exceeds the opportunity cost of resources, which is zero in long-run perfect competition.

Game Theory

The study of how agents make decisions in situations where the outcome depends on the actions of others.

Nash Equilibrium

A situation in a non-cooperative game where each player's strategy is optimal given the strategies chosen by others.