CH 12

The profit box on a perfectly competitive market is shown by

where MC and the Demant curve meet and straight down till it touches the ATC curve

What is the difference between Allocative and Productive efficiency

Productive efficiency pertains to production within an industry while allocative efficiency pertains to production across all industries

Why are firms willing to accept losses in the short run but not in the long run?

There are sunk costs in the short run but not in the long run

Productive Efficiency is

When a good or service is produced at lowest possible cost

A price taker is

a firm that is unable to affect the market price

In a perfectly competitive market, the demand curve for an individual firm is

a horizontal line at the market equilibrium price

In a perfectly competitive market P = Marginal Revenue = Average Revenue because

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

Allocative Efficiency is when every good or service

is produced up to the point where the marginal benefit for consumers equals the marginal cost of producing it

A firm is likely to be a price taker when

it represents a small fraction of the total market

For a market to be perfectly competitive, there must be

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

A firm maximizes profit at the level of output at which

marginal revenue equals marginal cost

In the short run, a firm's break even point is the

minimum point of the Average total cost curve

In the long run, a firm's exit point is the

minimum point of the average total cost curve

In the short run, a firm's shutdown point is the

minimum point on the average variable cost curve