3.6 Part 2
A firm profits or breaks even
When is marginal revenue equal to marginal cost being greater than or equal to average total cost?
Many firms produce the same product, there are many buyers, many sellers, and firms can enter or exit without restriction
What is a perfectly competitive market?
A firm still makes a loss when shut down due to
What are short run fixed costs?
At each additional unit produced, a firm loses profits when
What is marginal cost exceeds marginal revenue?
Existing firms expand their output
When does entry occur?
A firm operates at a loss
When is marginal revenue equal to marginal cost between average total cost and average variable cost?
Firms will seek a quantity of output in which profits are highest and losses are lowest
How do perfectly competitive firms react in the short run?
In terms of price, a firm can continue producing in the short run
When is price above average variable cost?
A firm will supply less units at every price when
What is marginal costs increase?
Marginal cost and marginal revenue are set equal to each other
What does a firm do to determine its profit maximizing quantity of output?
A firm shuts down temporarily
When is marginal revenue equal to marginal cost being less than average variable cost?
Profits attract more competitors to the market, but losses cause firms to leave the market, and eventually equilibrium will be reached
How do perfectly competitive firms react in the long run?
Market price is driven down to the zero profit level
When do many new firms enter the market and shift the supply curve to the right?
What is an increase in production and lower prices in the short run?
When a firm is small in a perfectly competitive market, it means
What is the firm has no power to change the price and must adhere to market price?
A firm earning a loss in the long run
When will a firm exit the industry?
The horizontal axis shows quantity and the vertical axis shows total revenue and total costs
What is shown on an average cost curve?
Price raised by a single cent or more
When does a firm in a perfectly competitive market lose customers?
A wage increase for workers equates to
What is an increased cost of production?
To minimize loss, a perfectly competitive firm will charge a price
What is a price equal to minimum ACP?
Obstacles preventing new competitors from entering a market
What are barriers to entry?
Where does total cost and revenue intersect?
A firm that must accept the market equilibrium price for a product
What is a price taker?
A market is imperfect when
What is a market can't produce at minimum cost or meet the equilibrium of MC=MR?
A perfectly competitive market is allocatively efficient when
What is customers benefit due to price while the firm still makes profits?