Perfect competition

in perfect competition,

Firms cannot influence the the market price with product decisions.

in a perfectly competitive market, we assume the product is _______________ in the mind of consumers.

Homogeneous

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

There are hundreds of other perfectly god substitutes and the market is competitive

as the market price ____________________, all else held constant, a profit-maximizing firm can afford to expand its production.

increases

Identify the characteristics of a perfectly competitive market.

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

The market condition in which firms do not face incentives to enter or exit the market and firms earn a normal profit known as:

Long-run equilibrium

The extra or additional revenue associated with the production of an additional unit of output is called the __________________ revenue.

Marginal

A perfectly competitive firm should produce output until the point where:

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

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

perfect

In the short run, as the price rises,

quantity supplied rises

_____________ profit is also known as zero economic profit.

normal

Marginal revenue is the:

additional revenue associated with the sale of the additional unit of output.

The amount of revenue produced per unit of an output sold is the ______________ revenue.

average

A perfectly competitive firm will incur its total ______________ cost of production when it shuts down temporarily in the short run.

fixed

When the total revenue earned by a firm is less than the total cost of production, the firm faces a ___________________.

loss

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

market price

All firms maximize profits by producing the quantity of output at which the marginal ______________ is equal to the marginal ________________.

revenue; cost

Profit equals the total _________ minus the total ________.

revenue;cost

in the _______________ run, when at least one input is fixed, as the price rises, so does the level of output supplied.

short

The price of a good times the number of units sold gives us:

total revenue

Economic profit equals:

total revenue minus economic costs total revenue minus explicit and implicit costs of production

economic profit equals:

total revenue minus economic costs total revenue minus explicit and implicit costs of production

Normal profit is also known as ___________ economic profit.

zero