Definitions
A market structure with many buyers and sellers selling identical products.
What is perfect competition?
Number of firms in a perfect competition.
What is many (a large number)?
Firms maximize profit where these two are equal.
Profit equals total revenue minus this.
What is total cost?
A common example close to perfect competition.
What are agricultural markets (like wheat or corn)?
Firms that cannot influence the market price are called this.
What are price takers?
Type of products sold in perfect competition.
What are identical goods?
If price is above marginal cost, firms should do this.
What is increase output?
In the long run, firms earn this type of profit.
What is zero economic profit?
If one seller raises price above market, consumers will do this.
What is buy from other sellers?
The demand curve for an individual firm in perfect competition is this shape.
Barriers to entry in perfect competition.
What are none (free entry and exit)?
If price is below marginal cost, firms should do this.
What is decrease output?
When firms are making profit, new firms will do this?
What is enter the market?
If one seller lowers price, demand for their product will be this
What is very high?
The additional cost of producing one more unit.
Information available to buyers and sellers.
What is perfect information?
Firms take the market price as given because they are this.
What are price takers?
When firms are losing money, firms will do this.
What is exit the market?
Why firms cannot differentiate their products.
What is because goods are identical?
The additional revenue from selling one more unit.
What is marginal revenue?
Because products are identical, firms compete mainly on this.
What is price?
The shutdown point occurs when price falls below this.
What is average variable cost?
Entry and exit push profits toward this level.
What is zero economic profit (normal profit)?
This explains why no firm has market power.
What is many competitors + identical products?