Chapter 14

a market in which economic forces operate unimpeded

• 1 both buyers and sellers are price takers
• 2 the number of firms is large
• 3 there are no barriers to entry
• 4 firms products are identical
• 5 there is complete information
• 6 selling firms are profit meximising entrepreneuraial firms

is a firm or individual who rakes the price determined by market supply and demand as given

are social, political or economic impediments that prevent firms from entering a market

the change in total revenue associated with a change in quantity

the change in total cost associated with a change in quantity

is just the oricontal sum of all the firms' marginal cost curves taking account of any changes in input prices that might occur

the amount the owners of business would have recieved in the next best alternative

that point below which the firm will be better off if it temporarily shuts down then it will if it stays in business

MC= MR = P

where marginal revenue equals marginal cost

margnial cost curve. only competitive firms have supply curves

find that level of output where MC = MR. profit is price less average total coss timees output at the profit maximizing level of output

in the short run competitive firsm can make a profit or loss, in the long run they make 0 profit

a price below average variable cost

horizontal summation of the marginal cost curves for all firsm in the market. an increase in the number of firms in the market shifts the market supply curve to the right while a decrease shifts it to the left

if profit were being made, new firms would enter and the market price would decline eliminating the profit. if losses were being made firms would exit and the market price would rise

a scheduel of quantites supplied where firms are makign zero profit

horizontal long-run supply curves

upward sloping long run supply curves

have downward sloping long run supply curves