Market structure

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market economy
Diana Hernandez
Flashcards by Diana Hernandez, updated more than 1 year ago
Diana Hernandez
Created by Diana Hernandez over 4 years ago
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There are many small firms, each producing an identical product and each too small to affect the market price. Perfect competition
faces a completely horizontal demand (or dd) curve The perfect competition
the extra revenue gained from each extra unit sold is therefore Market price
a firm will............. when it produces at that level where marginal cost equals price. Maximize profits
the level of price, at which the firm breaks-even, covering all costs but earning zero-profit Zero-profit point
revenue= ? Variable costs
Losses=? Fixed costs
when revenues just cover variable costs or where losses are equal to fixed costs Shutdown rule
when the price falls below average variable costs. Shutdown rule
Any change in outputs must use the same fixed amount of the factor production short-run equilibrium
when capital and all other factors are variable and there are free entry and exit of firms from the industries. Long-run equilibrium
when they are newly formed or when an existing firm decides to move into a new sector. entry
when they stop producing because the line is unprofitable and can produce that the firms go bankrupt when it can´t pay bills exit
when there are no barriers to entry or exit, such as government regulations or intellectual propoerty rights as patents and softward. free entry and exit
is the price equals marginal cost equals the minimum long-run average cost for each identical firm zero-profit long run equilibrium
Increase in demand for the commodity will raise the price of the commodity Demand rule
An increase in supply of commodity will generally lower the price and increase the quantity bought and sold supply rule
it is when you can increase the annual outputs of a product by adding more labor to each acre of land increasing costs
will operate if variable factor of production are added to fixed amounts of factors such as land diminish returns
the payment for the use of such a factor of production when the quantity supplied is constant at every price Pure economic rent
if the supply decrease the price increase and quantity decrease
if the supply increase the price decrease and quantity increase
the market is ------------ when it provides its consumers with the most desirable set of goods and services, given the resources and technology of the economy Efficiency
occurs when no possible reorganization of production can make anyone better off without making someone else worse off. allocative efficiency
is the balancing of supply and demand in a market or economy characterized by perfect competition competitive equilibrium
the difference between that amount that a consumer would be willing to pay for a commodity and the amount actually paid consumer surplus
the difference between the producer sales revenue and the producer's costs, its measured the area above the supply curve but under the price line up to the amount sold producer surplus
when a firm has market power in a particular market (monopoly). the firm can raise the price of its product above its marginal costs imperfect competition
they arise when some of the side effects of production or consumption are not included in the market price externalities
the invisible-hand theory that assumes that buyers and seller have complete information about the goods and services they buy or sell imperfect information
prevails in an industry whenever individual sellers can affect the price of their output Imperfect Competition
the major kinds of imperfect competition are Monopoly, oligopoly, and monopolistic competition
Imperfect competitors are price makers not price-takers
a single seller with the complete control over an industru Monopoly
Means "Few sellers". each individual firm can affect the market price example; car makers Oligopoly
a large number of sellers produce differentiated products. Monopolistic competition
is a market in which the industry´s outputs can´t efficiently produce by several firms Natural Monopoly
are factors that make it hard for new firms to enter an industry. Barriers to entry
an industry may have few firms and limited pressure to compete, is when The barriers are high
Governments sometimes restrict competition in certain industries, include patents, entry restrictions. Legal restrictions
advertising can create product awareness and loyalty to well- known brands Advertising and product differentiation
the monopolistic practices lead to high prices ad low outputs and therefore reduce consumer welfare. Monopoly behavior
the conditions of maximization in perfect competition P=MC
The conditions of maximization in monopoly MI=MC
Is the change in revenue that is generated by an additional unit of sales. Marginal revenue
what is the relation between the price elasticity of demand and marginal revenue? Marginal revenue is positive when demand is elastic Zero when demand is unit-elastic and negative when demand is inelastic
will occur when outputs are at the level where the firm's marginal revenue when is equal to his marginal cost Maximum profit
monopoly equilibrium is also called maximum-profit point
a monopolistic will maximize its profits by setting output at the lever where MC=MR
The marginal principle Let bygones be bygones
Means that the people will maximize their incomes or profits or satisfaction by counting only the marginal costs and marginal benefits of a decision Marginal principle
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