Microeconomics Chapter 12

Profit for a perfectly competing firm can be expressed as

Profit=(P-ATC)xQ

In the long run, perfect competition

results in allocative efficiency because firms produce where price equals marginal cost

Does the market system result in productive efficiency? In the long run, perfect competition...

results in productive efficiency because firms enter and exit until they break even where price equals minimum average cost

What is the relationship between a perfectly competitive firm's marginal cost curve and it's supply curve?

A firm's marginal cost curve is equal to its supply curve for prices above average variable cost

What does a perfectly competitive market curve look like?

Horizontal

A price taker is...

a firm that is unable to affect the market price

In a perfectly competitive market, demand for oranges increases which results in the supply of oranges

also increases because producers seek the highest return on their investments

When do firms enter and exit an industry?

economic profits attract firms to enter the industry, and economic losses cause firms to exit an industry

In a perfectly competitive market, P=MR=AR because

firms can sell as much output as they want at the market price

A firm is likely to be a price taker when

it sells a product that is exactly the same as every other firm

For a market to be perfectly competitive, there must be

many buyers and sellers with all firms selling identical products no barriers to new firms entering the market

In a perfectly competitive industry in the long run,

new firms will enter if existing firms are making profit and existing firms will exit if they are experiencing losses

The supply curve for a firm in a perfectly compatible market in the short run is

that firm's marginal cost curve for prices at or above average variable cost

Perfectly competitive firms should produce the quantity where

the difference between total revenue and total cost is as large as possible