ECON 102 Final- Chapter 23: Perfect Consumption

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Market Structure: All features of a market that effect the behavior and performance of the firms Things in a market structure: number of sellers, information, entry barriers, product differentiation Market structure is important because it...: Predicts beavhior, output, efficiency Market Power: When a firm can influence the price of the product In a competitive market a firm will have: little or no power In a non competitive market a firm will have: a lot of power In perfect competition a firm has: no effect on market price Price taker: a firm must get a product at a certain price because it doesn't have a choice

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Short Run-Even when economic profits are zero: you can still have positive accounting profits Short run supply curve should look like _____ and be above _______: Marginal costs, average variable costs Long Run- Economic profits tell new firms: to enter the market Long run- economic losses tell exsisting firms to: exit the market Long run- Firms make _____ profits at equilribrium: Zero Long run- First enter and exit the industry because of: profit opportunities Long run- if economic profits are positive (three things): 1) firms will enter 2) Supply inceases 3) Price falls until profits are 0

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A perfect competitior has (4 things): large number of buyers/sellers, a homogenous product, FULL acess to price information, no barriers to enter or exit

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Free entry means that: nothing stands in your way when you want to enter the market The demand curve of the perfect competitor is: perfect elastic (horozontial)

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Long run- if economic profits are negative (three things): 1) firms will exit 2) supple decreases 3) Price rises until profits are 0

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Long run- The firm ___ change the scale of its plant: can Long runPrice=______=_______=_______=________: Marginal revenue, marginal cost, short run minimum average costs, long run minimum average cost

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If a firm _____ the price is sells nothings: Raises If a firm _______ the price it earns less profit: Lowers The competitive price is set where the: Demand and supply curve intersect Profit=: Total revenues - Total costs The firm chooses the _____ while the market chooses the ______: Quantity, price

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Marginal Cost pricing: Price charged is equal to the opportunity cost of the last unit produced (P=MC) Allocative Efficiency: Marginal value equals the marginal costs "Just the right amount"

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Find optimal profit (profit maximization) where: Marginal costs equals marginal revenue Marginal revenue equals _____ in a perfectly competitive firm: Price Price=___=____: Marginal Revenue, Marginal Costs Number of units sold (Q) X Average proit per unit =: Profits When a firm's owners sell the assets it....: Goes out of business When a firm produces at q=0: it shuts down, but still in business The short run break-even price is when Price=: minimum average total costs Short Run- Positive economic profits occur when price is ______ than ______: greater, average total costs Short Run- Negative economic profits occur when price is _______ than _______: less, average total costs Short Run- If price is less than minimum average variable costs: shut down will occur Short Run- If minimum average variable costs is less than price which is less than minimum average total costs then....: q>0 but have economic losses
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Allocative Inefficiency: Created DWL, p could be greater than marginal cost

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