Microeconomics Chapter 12: Firms in Perfectly Competitive Markets

  1. Allocative efficiency
    A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it.
  2. Average Revenue (AR)
    Total revenue divided by the quantity of the product sold.    = TR/Q sold
  3. Economic loss
    The situation in which a firms total revenue is less than its total cost, including all implicit costs.
  4. Economic profit
    A firms revenues minus all its costs, implicit and explicit.
  5. Long-run competitive equilibrium
    The situation in which the entry and exit of firms has resulted in the typical firm breaking even.
  6. Long-run supply curve
    A curve that shows the relationship in the long run between market price and the quantity supplied.
  7. Marginal revenue (MR)
    The change in total revenue from selling one more unit of a product.
  8. Perfectly competitive market
    A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.
  9. Price taker
    A buyer or seller that is unable to affect the market price.
  10. Productive efficiency
    A situation in which a good or service is produced at the lowest possible cost.
  11. Profit
    Total revenue minus cost.
  12. Shutdown point
    The minimum point on a firms average variable cost curve, if the price falls below this point, the firm shuts down production in the short run.
  13. Sunk cost
    A cost that has already been paid and cannot be recovered.
Card Set
Microeconomics Chapter 12: Firms in Perfectly Competitive Markets
Chapter 12