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
