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