AP®︎ Microeconomics: Topic 3.7 Flashcards

A market with many small firms, identical products, free entry and exit, and no price control.

A firm that must accept the market price because its own output is too small to affect price.

Produce the quantity where marginal cost equals marginal revenue, as long as price covers average variable cost.

A market supply-demand graph paired with a firm cost-revenue graph linked by the market price.

Profit if price exceeds ATC, loss if AVC < price < ATC, shutdown if price falls below AVC.

The minimum average variable cost; below this price, a firm produces zero in the short run.

Total revenue minus total cost; on a graph, it is (price minus ATC) times quantity.

A temporary market outcome where firms may earn profits, losses, or break even at the current price.

Profits attract new firms and losses cause firms to leave, shifting market supply.

The output level where average total cost is minimized.

A demand shift changes market price, creates short-run profit or loss, then triggers entry or exit.

Industry expansion leaves long-run price unchanged, raises it, or lowers it depending on input cost changes.

Market price communicates marginal benefits and marginal costs, guiding consumers and producers to efficient choices.

A competitive firm's demand curve is horizontal, so price equals marginal revenue for every unit sold.

A market state where firms earn zero economic profit, so no firms enter or exit.

In long-run equilibrium, price equals marginal cost and minimum average total cost.

Total cost exceeds total revenue; on a graph, it is (ATC minus price) times quantity.