Term
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Definition
| a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. firms can freely enter or exit the market |
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Term
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Definition
| the change in total revenue from an additional unit sold |
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Term
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Definition
- total revenue divided by the quantity sold
- tell how much revenue a firm receives for the typical unit sold
- all firms average revenue equals the price of the good |
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Term
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Definition
- where the profit (TR - TC) is at its highest
- where marginal revenue does NOT exceed marginal cost
- where change in product equals zero
- where the horizontal price line intersects with the marginal cost curves
- regardless if a firm begins production at a high level or a low level, it will eventually level out to a level that maximizes profit |
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Term
| Price in a competetive market |
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Definition
- decided by the buyers and sellers as a whole, not by an individual
- equal to the average revenue and marginal revenue |
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Term
| The Firm's Short Run Decision to Shut Down |
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Definition
- a firm will shut down if the revenue that it would get from producing is less than the variable cost of production
- aka if price is less than the AVC
- the competetive firm's short run supply curve is the portion of its MC curbe that lies above the AVC |
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Term
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Definition
| a cost that has already been committed and cannot be recovered |
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Term
| Firm's Long Run Decision to Enter or Exit a Market |
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Definition
- a firms exits the market if the revenue it would get from producing is less than its total costs
- TR < TC
- P < ATC
- the firm's long run supply curve is teh portion of its MC curve that lies above ATC |
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Term
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Definition
- (P - ATC) x Q --> shows a profit
- (ATC - P) x Q --> shows a loss
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