ECON TOPIC 9 PERFECT COMPETITION

Average revenue is the:

amount of revenue per unit of a product sold.

To calculate profit, we need to identify three pieces of information:

average total cost quantity of output price

In a perfectly competitive market, we assume the product is identical in the minds of ____________________.

consumers

Normal profit is also knows as zero _______profit

economic

A perfectly competitive firm should produced output until marginal ______equal marginal _______

-cost -revenue

A firm should shutdown if:

P<AVC

Marginal Revenue is the: (MR)

additional revenue associated with the sale of an additional unit

Total revenue minus the implicit and explicit costs of production is _____________profit.

economic

Zero_______profit is when the firm's revenue equal its operation costs without a loss.

economic

The marginal cost

extra or additional cost associated with the production of an additional unit of output

When a firm shuts down in the short run, it must still pay the _______costs.

fixed

At the shutdown point, the price is __________the average variable cost.

less than

____________competition is a market structure characterized by the interaction of large number of buyers and sellers, in which the sellers produce a standardized or homogeneous product.

perfect

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

price

Total revenue equals:

price times quantity

All firms maximize by producing the quantity of output at which the marginal revenue is equal to the marginal cost.

profit

For a firm, profit equals total _____________ minus total __________.

revenue cost

Average Revenue (AR)

revenue per unit sold, equal to total revenue divided by the quantity of output produced and sold.

A company can break even and meet operating costs without a loss when it earns _______economic profit.

zero

The four characteristic of a perfectly competitive market are:

-easy entry and exit -a standardized product -a large number of buyers and sellers -producer who are price takers

In a perfectly competitive market, homogeneity means that firms must charge the market price for the goods or the services they produce, because:

-there are hundreds of other perfectly good substitudes -the market is competive

Economic profit

level of profit that occurs when total revenue is greater than total cost

If the market price is below the average variable cost, the firm is:

losing money is the short run and should shut down.