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Micro- Perfect Competition and the Supply Curve

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Term
Definition
show 1. Many buyers and sellers 2. The product is standardized across sellers (standardized product aka commodity) 3. Free entry and exit  
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show fraction of the total industry output accounted for by that producer's output/both sellers and buyers are price-takers (their actions have no effect on price)  
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show "commodity": Consumers regard different sellers' products as equivalent  
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show New producers can easily enter into an industry and existing producers can easily leave that industry  
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show TR=PxQ (price x quantity sold)  
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show Profit=TR-TC (total revenue-total cost)  
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show change in total revenue generated by an additional unit of output MR=change in TR/change in quantity  
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Optimal output rule   show
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show Each time the firm produces another unit, there are extra costs and extra revenues  
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If MR> MC producing less will   show
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show add to profit  
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show Choose the quantity of output where P=MC  
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If TR>TC, the firm is   show
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If TR=TC, the firm   show
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show incurs a loss  
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show Profit= TR-TC=(TR/Q - TC/Q) x Q or Profit = (P-ATC) x Q  
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Break-even price   show
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show price is greater than average cost  
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Shut-down price   show
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Firms will choose to produce (even at a loss) IF   show
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show zero economic profits  
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Should a competitive firm keep producing even if it faces short-run losses (and is producing at a point on its MC curve that is above the minimum AVC)?   show
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In the short run, a firm will produce IF   show
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show P<min AVC  
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If P> break-even (min ATC), firms are   show
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show more firms are willing to supply  
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show the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur  
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The LRS shows how   show
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show always flatter-more elastic-than the short-run industry supply curve  
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show -a higher price attracts new entrants in the long run, raising industry output and lowering price -a fall in price induces existing producers to exit in the long run, reducing industry output and raising price  
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If the market price is above the break-even level (no matter how slightly) ...   show
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The long-run market equilibrium in perfectly competitive industry with identical firms results in all firms:   show
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Created by: kthomas96
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