Chapter 9: Pure Competition

A very large number of firms producing a standardized product; easy market entry/exit

________- Resources apportioned among firms + industries to yield mix of goods /services most wanted by society.

1 firm is sole seller of good/service; no market entry

Relatively large number of sellers producing differentiated products; non-price competition

Only a few sellers of a standardized or differentiated product; mutual interdependence

Cannot change market price, can only adjust to it

Revenue per unit

Price * corresponding quantity firm can sell

Change in total revenue (or the extra revenue) that results from selling one more unit of output

Firm makes normal profit but not economic profit

In the short run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost (as long as producing is preferable to shutting down).

Solid segment of marginal cost curve

Effect that changes in number of firms in industry will have on costs of individual firms in industry

Industry expansion or contraction will not affect resource prices and therefore production costs

Industry expands → Firms experience lower costs

Goods being produced in least costly way

Resources apportioned among firms + industries to yield mix of goods/services most wanted by society

Difference between the maximum prices that consumers are willing to pay for a product (as shown by the demand curve) and the market price of that product

Difference between the minimum prices that producers are willing to accept for a product (as shown by the supply curve) and the market price of the product