Term
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Definition
| Perfect Competition -Many firms sell identical products to many buyer -There are no restritions on entry into the into the industry -Established firms have no advantage over new ones -Sellers and buyers are well informed about price |
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Term
| Mininimum Effecient Scale |
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Definition
Mininimum Effecient Scale
-Smallest Quantity of output at which long run average costs reaches its lowest level |
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Term
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Definition
Price Taker
-A firm that cannot influence the price of a good |
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Term
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Definition
Economic Profit
-The Total Revenue minus total cost |
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Term
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Definition
Marginal Revenue
-Change in Revenue that results by a one unit increase in quantity sold |
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Term
| Short Run Decisions in a Perfectly competitive market |
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Definition
Short Run Decisions in a Perfectly competitive market
1. Whether to produced or the shut down
2. If the decision is to produce, what quantity to produce |
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Term
Long Run Decisions in a Perfectly competitive market
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Definition
Long Run Decisions in a Perfectly competitive market
1. Whether to increase/decrese plant size
2. Whether to stay in the industry or leave it |
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Term
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Definition
Marginal Anaysis
A way to find the profit maximizing output. Find where MR(marginal revenue) is equal to MC(marginal cost)[image] |
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Term
| Three different Profit/Loss in the Short Run |
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Definition
1.Economic Profit- Firm makes money as Price exceed ATC
[image]
2. Normal Profit- Firm Breaks even Price=ATC
[image]
3. Economic Loss- Firm loses money, ATC exceeds Price
[image] |
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Term
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Definition
[image]
-In the shortrun if a firm is just covering its variable costs it will shutdown as its indifferent between producing/shutting down |
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Term
| Firms Short Run Supply Curve |
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Definition
Firms Short Run Supply Curve
If Price is above AVC, firm maximizes profit by producing where marginal cost equals price, as prices below minimun cost firm shuts down[image] |
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Term
| Short-Run Industrial Supply Curve |
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Definition
Short-Run Industrial Supply Curve
Show quanuty supplied by industry at Each Price when the #/size of each firm remains constant[image] |
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Term
| Short Run Equilbrium/ Change in Demand -draw graph and show what happeneds when demand changes |
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Definition
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Term
| What are the 2 long Run Adjustments and how do they affects the Industry |
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Definition
What are the 2 long Run Adjustments and how do they affects the Industry
1. Entry/Exit
2. Change in Plant Size |
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Term
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Definition
Shifts the Industrial Supply Curve (Right for Entry/Left for Exit)
Firms will enter when the industry is making an economic profit, causing price to fall, each firm to produce less units each, more units are made overall.
"As new firms enter an industy, the price falls and the economic profit of each existing firm decreses"
Frims will exit when the industry is making an economic loss, causing price to rise and each firm increases production
"As frims leave an industy, the price rises and the economic loss of each remaining firm decreases
[image] |
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Term
| Draw the Total Product Cruve |
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Definition
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Term
| Draw the marginal PRoduct Curve |
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Definition
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Term
| Draw the average Product curve |
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Definition
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Term
| draw total cost curves (TC,TVC,TFC) |
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Definition
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Term
| Draw relationship between Product Curves and Cost curves |
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Definition
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