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.
Average Revenue (AR)
Total revenue divided by the quantity of the product sold. = TR/Q sold
The situation in which a firms total revenue is less than its total cost, including all implicit costs.
A firms revenues minus all its costs, implicit and explicit.
Long-run competitive equilibrium
The situation in which the entry and exit of firms has resulted in the typical firm breaking even.
Long-run supply curve
A curve that shows the relationship in the long run between market price and the quantity supplied.
Marginal revenue (MR)
The change in total revenue from selling one more unit of a product.
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.
A buyer or seller that is unable to affect the market price.
A situation in which a good or service is produced at the lowest possible cost.
Total revenue minus cost.
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.
A cost that has already been paid and cannot be recovered.
Microeconomics Chapter 12: Firms in Perfectly Competitive Markets