ECON 2000: Survey of Economics - Lecture 6: Firms in Competitive Markets

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What is the defining characteristic of a competitive market?

Identical products

In the short run, when should a competitive firm shut down?

When total revenue divided by quantity (TR/Q) is less than variable cost per unit (VC/Q)

What is the long-run decision for a competitive firm when total revenue is less than total cost?

Exit the market

Why do competitive firms stay in business even if they make zero profit?

To maintain market share

What does a firm's supply curve represent in a competitive market?

Marginal cost

At what quantity is the average-total-cost curve at its minimum?

At the point where marginal cost equals average total cost

What is the key condition for a firm to enter a competitive market?

Price greater than average total cost

What should a competitive firm do in the short run if price is less than average variable cost?

Shut down temporarily

Understand the concept of competitive markets in economics, where many buyers and sellers trade identical products as price takers. Explore the characteristics of a competitive market and the freedom for firms to enter or exit.

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