Term
What is the first characteristic of a perfectly competitive industry?
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Definition
There are a large number of independently acting (No Collusion) buyers and sellers.
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Term
What is the second characteristic of a perfectly competitive industry?
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Definition
All goods have identical characteristics and are perfectly substitutible (Homogeneous). This means that there is no non-price competition.
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Term
What is the third characteristic of a perfectly competitive industry?
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Definition
A seller that faces a single market price and can sell as much as it desires only at that price.
(Firms are price takers) Meaning a single firm has no effect on market price.
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Term
What is the fourth characteristic of a perfectly competitively industry?
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Definition
Entry and exit into the industry are not prohibitively costly (Entry and exit are not prohibitively costly).
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Term
Perfectly Competitive firms have what kind of demand because of the fact they are price takers?
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Definition
Perfectly elastic demand
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Term
What is Total Revenue?
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Definition
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Term
What is Average Revenue?
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Definition
Total Revenue Divided by Quantity
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Term
What is Average Total Cost?
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Definition
Total Cost Divided by Quanity
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Term
What is Product Price?
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Definition
Average Revenue
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Term
How do you calculate Marginal Revenue?
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Definition
Change in Total Revenue
Divided by Change in Quantity
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Term
How do you calculate Marginal Cost?
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Definition
Change in Total Cost
Divided by Change in Quantity
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Term
What is Marginal Revenue?
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Definition
The change in total revenue that results from selling one more unit of output.
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Term
What is Marginal Cost?
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Definition
The change in total cost that results from buying one more unit of a product.
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Term
Is price constant in a perfectly competitive industry?
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Definition
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Term
In a Perfectly competitive industry what does price equal?
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Definition
Price equals average revenue, which also equals marginal revenue.
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Term
What is the slope of total revenue?
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Definition
Change in Total Revenue
Divided by Change in Quantity
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Term
The profit maximization condition in all firms, time frames, and market structures is what?
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Definition
That marginal revenue equals marginal costs.
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Term
Where total revenue is greater in excess than total cost is what?
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Definition
The profit maximizing output
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Term
What is economic profit?
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Definition
Total Revenue minus Total Cost
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Term
A firm that is earning economic profit is called what?
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Definition
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Term
What is the slope of total revenue?
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Definition
Marginal Revenue
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Term
What is the slope of total cost?
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Definition
Marginal Cost
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Term
When the slope of total cost is equal to total revenue?
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Definition
Profit is being maximized.
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Term
How do you calculate marginal costs?
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Definition
Change in total cost
Divided by
Change in Quantity
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Term
What is a Break Even point?
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Definition
Where total revenue equals total cost, in which there is no economic profit.
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Term
What is it called when a firm is suffering losses?
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Definition
It is in the red.
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Term
What is Loss-Minimization?
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Definition
To maximize profit by minimizing the excess of total cost over total revenue
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Term
Where are economic decisions made?
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Definition
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Term
If total fixed costs are greater than losses at the margin if they kept operating during the short run, what do they do?
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Definition
Keep operating, and hope they improve.
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Term
When losses are greater than the total fixed costs, what must the firm do in the short run?
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Definition
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Term
Total revenue is only a linear positive line, during what?
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Definition
The short run
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