Perfect Competition, Revenues, and Profit Max

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Flashcards on Perfect Competition, Revenues, and Profit Max

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6 Terms

1
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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.

2
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How is total revenue calculated?

Price of output multiplied by the quantity sold.

3
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How is profit calculated?

Total cost subtracted from total revenue.

4
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What is marginal revenue?

The change in total revenue due to a change in quantity sold.

5
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What is the profit maximization rule?

Operate where marginal revenue is equal to marginal cost.

6
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In perfect competition, what is the relationship between price, marginal revenue, and average revenue?

P = MR = AR