Flashcards
Chapter 8- Microeconomics
Cards in this deck (15)
- 1What are the 4 major market structures?Perfect competition, monopoly, monopolistic competition, and oligopoly.
- 2What are the characteristics of a perfectly competitive market?Many buyers and sellers
A homogeneous product
No significant barriers to entry or exit - 3What does the individual price taker's demand curve look like?Its horizontal over its entire range of output.
- 4What effect will a change in market price have on an individual price taker's demand curve?The position of the individual firm's demand curve varies directly with the market price.
- 5What is total revenue?Price x quantity sold
- 6What is the average revenue and marginal revenue?Average revenue is the total revenue divided by the quantity sold.
Marginal revenue is the change in total revenue from the scale of an additional unit of output. - 7How do firms maximize profit?Firms produce where MR=MC
MR>MC, seller should expand
MR - 8How do we determine if a firm is generating an economic profit or loss?MR=MC at q*
if at q* the firms price is greater than ATC this is making economic profit. - 9What is the individual firm's short-run supply curve?The portion of the MC curve that lies above the min. of the AVC curve is the short-run supply curve for the individual competitive seller.
- 10Can we review the short run production decisions of an individual competitive firm?Market price rises, the output decisions of a competitive firm evolve from not producing at all to operating at an economic loss, economically break even or to generate an economic profit.
- 11What happens to economic profits and losses in the long run?Will encourage the entry of new firms which will shift the market supply curve to the right, driving down the firms prices and therefore the revenues. Economic losses signal resources to leave the industry, leading to supply reduction, higher prices, and increased revenues.
- 12What is the long run equilibrium for the competitive firm?Only at 0 economic profits is there no tendency to either enter or exit the industry, This is the long-run equilibrium for the competitive firm.
- 13What are constant-cost industries?The cost curves of the firm are not affected by changes in the output of the entire industry.
- 14What are increasing costs and decreasing cost industries?Increasing--> cost curves rise as total output increases
Decreasing--> cost curve declines as total output increases. - 15How is perfect competition economically efficient?Achives productive efficiency, from production at least possible cost. (P=MC) and production allocated to reflect consumers wants.
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- Flashcards on Chapter 8- Microeconomics, created by mesangster on 15/03/2015.
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