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Flashcards on Perfect Competition, Revenues, and Profit Max
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What are the characteristics of perfect competition?
Price takers, large number of firms, homogeneous product, easy entry and exit, good information for both buyers and sellers.
How is total revenue calculated?
Price of output multiplied by the quantity sold.
How is profit calculated?
Total cost subtracted from total revenue.
What is marginal revenue?
The change in total revenue due to a change in quantity sold.
What is the profit maximization rule?
Operate where marginal revenue is equal to marginal cost.
In perfect competition, what is the relationship between price, marginal revenue, and average revenue?
P = MR = AR