Perfect Competition

In perfect competition, a firm earns an economic profit when the price (P) is greater than the marginal cost (MC) and the average total cost (ATC). This means that the firm is earning more revenue than its total costs, including opportunity costs.

In the long run, firms in perfect competition will enter or exit the market until the price equals both marginal cost (MC) and average total cost (ATC). This ensures that firms earn zero economic profit.

In perfect competition, a firm maximizes its profit by producing at the output level where marginal cost (MC) equals marginal revenue (MR). This is because each additional unit produced will generate more revenue than its cost.

A firm in perfect competition will shut down in the short run if its total revenue (TR) is less than its total variable cost (TVC). This means that the firm is losing money on every unit produced, and it's better to stop producing and minimize losses.

The short-run market supply curve in perfect competition is the sum of the marginal cost (MC) curves of all firms, above their average variable cost (AVC) curves. It represents the total quantity of output supplied by all firms at each price level.

Changes in fixed costs do not affect the short-run supply curve of a perfectly competitive firm. This is because fixed costs do not vary with the level of output, and therefore do not influence the firm's decision to produce more or less.

The economic incentive for firms to enter a perfectly competitive industry is the presence of positive economic profits. When firms earn positive economic profits, other firms are attracted to enter the market, seeking to capture some of these profits.

If a firm in perfect competition is operating in the short run where price is higher than average variable cost (AVC), but lower than average total cost (ATC), it will continue to operate at a loss. This is because the firm is covering its variable costs, but not its fixed costs.

The situation where a firm produces and sells a product or service for which there are no close substitutes and entry into the market is restricted.

The point where a monopolist maximizes profits, occurring when marginal revenue (MR) equals marginal cost (MC).

The demand curve faced by a monopolist, which is downward sloping due to the lack of close substitutes and the ability of the monopolist to influence price.

A situation where the long-run average cost of production continuously decreases as output increases.

The practice of charging different prices to different customers for the same product or service, based on their willingness to pay.

The loss of economic welfare that occurs when a monopolist restricts output below the socially efficient level, leading to a higher price and a lower quantity.

A market structure where many firms produce identical products, there's free entry and exit, and no firm can influence the market price.

The point where a firm produces at the minimum of its average variable cost (AVC).

The condition where a firm earns zero economic profit in the long run, meaning it just covers its total costs, including opportunity costs.

The situation where a firm's marginal revenue (MR) exceeds its marginal cost (MC) at the current level of output.