Perfect Competition

identify the conditions that guarantee consumers will enjoy the lowest prices possible

Every firm produces the exact same product Individual firms are price takers

In a perfect competitive market, homogeneity means that firms must charge the market price for the goods or services they produce, becuase

There are hundreds of other perfectly god substitues and the market is competitive

If an economy is going to produce the goods and services most wanted by society, competitive firms:

produce more of the products we value most and fewer of the products we value least

profit equals the total ____ minus the total ______

revenue, cost

profit equals ________ revenue minus ______ cost

total, total

______________ profit is also known as zero economic profit

Normal

In the short run, as the price rises,

quantity supplied rises

The perfectly competitive model is the most efficient type of market and is characterized by both ______ and ____ efficiency.

allocative; productive

Average revenue is the:

amount of revenue per unit of product sold

The price of a good, times the number of units sold gives you

total revenue

Economic profit equals

total revenue minus either economic costs or implicit and explicit costs.

total revenue minus the _________ and _________ costs of production is economic profit

Explicit, implicit

A perfectly competitive market involves firms that produce identical products, this guarantees

consumers receive the lowest price

In perfect Competition,

firms can not influence the market price with production decision.

the long run,

firms earn a normal profit

The demand for a perfectly competitive firm's product is a ____________ line originating at the market price

horizantal

In a perfectly competitive market, we assume the products are, _______ in the minds of consumers

identical

As the market price decreases, all else held constant, a profit maximizing firm will ____________ its produciton

lower

Extra or additional revenue associated with the production of an additional unit of output is the _____ revenue

marginal

A perfectly competitive firm should produce output until

marginal revenue equals marginal cost

In a perfectly competitive market, a single firm is a price taker, and therefore, can only charge the _______ price.

market

A _____________ profit simply indicates that the firm is doing just as well as it would have if it had chosen to use its resources to produce a different product or to compete in a different industry.

normal

A market structure characterized by the interaction of a large numbers of buyers and sellers, in which the sellers produce a standardized, or homogeneous, product, is known as:

perfect competition

Firms that take or accept the market price and have no ability to influence that price are ___________ takers.

price

All firms maximize profits production the quantity of output as which the marginal _______ is equal to the marginal _______

revenue, cost