Chapter 12-Microeconomics(Perfect Competition)

Short run market supply curve

This supply curve shows the quantity supplied by all firms in the market at each price when each firm's plant and the number of firms remain the same.

Total revenue

Total revenue is equal to the price multiplied by there quantity sold. TR=Price(multiplied by) Quantity sold. (Example: If campus sweaters sells 9 sweaters at $25 each. Their total revenue would be $225.

Price Taker

A firm that cannot influence that market price because its production is an insignificant part of the total market. *All firms in perfect competition are price takers (Example-Wheat farmer in Kansas with a thousand acres planted-compared to others wheat corporations your farm barely competes in size. Nothing makes your wheat any better than any other farmers and all buyers of the wheat know the price at which they can do business)

Perfect Competition

A market in which ALL OF THE FOLLOWING FORCES EXIST A. Many firms sell identical products to many buyers. B. There are no restrictions on entry into the market. C. Established firms have no advantage over new ones D. Sellers and Buyers are well informed about prices. (Example- Farming, fishing, photo finishing, lawn services plumbing and paining industries.) Arises if the minimum efficient scale of a single producer is small relative to the market demand for a good or service.

Marginal Revenue

The change in total revenue that results from a one unit increase in the quantity sold. Marginal revenue is calculated by diving the change in total revenue by the change in quantity sold.

Shutdown point

The price and quantity at which a firm is indifferent between producing and shutting down. The point occurs at the price and the quantity at which average variable cost is a minimum. At this point, the firm is minimizing its lost and its loss is equal to its total fixed cost.