Micro Ch_8 Vocab Perfect Competition

Front

Break Even Point

Back

The level of output where the marginal cost curve intersects the average cost curve at the minimum point of AC. If the price is at this point, the firm is earning zero economic profits.

Front

Entry

Back

The long-run process of firms entering an industry in response to industry profits.

Front

Exit

Back

The long-run process of firms reducing production and shutting down in response to industry losses.

Front

Long-run equilibrium

Back

Where all firms earn zero economic profits producing the output level where P = MR = MC = and P = AC.

Front

Marginal revenue

Back

The additional revenue gained from selling one more unit.

Front

Market structure

Back

The conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold.

Front

Perfect competition

Back

A situation in which each firm faces many competitors that sell identical products.

Front

Price taker

Back

A firm in a perfectly competitive market that must take the prevailing market price as given.

Front

Shutdown point

Back

The level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately.

Front

Profit-maximizing quantity of output

Back

The quantity where marginal revenue is equal to marginal cost. (MR = MC)