AP®︎ Microeconomics: Topic 4.4 Flashcards

An imperfect market with many firms selling differentiated products and easy entry and exit.

Many firms, differentiated products, some price-setting power, low entry barriers, and non-price competition.

Selling similar goods with real or perceived differences in quality, style, branding, or service.

Competing through advertising, branding, packaging, location, or service instead of lower prices.

Output is where MR equals MC, and price is found on the demand curve.

Profit if price exceeds ATC, loss if price is below ATC, and break-even if price equals ATC.

Entry and exit lead firms to earn zero economic profit where demand is tangent to ATC.

Profits attract firms and shift each firm's demand left; losses cause exit and shift demand right.

Both slope downward, with marginal revenue below demand because firms have some market power.

Firm demand is relatively elastic because many close substitutes are available from rival sellers.

Price exceeds marginal cost, so too little is produced relative to the socially efficient amount.

The lost total surplus from producing less than the socially efficient output where price exceeds marginal cost.

Consumer surplus is below demand and above price; producer surplus is above supply-like cost and below price.

Find quantity at MR equals MC, price on demand, then multiply quantity by price minus ATC.

Find the triangle between demand and MC over the units between actual and efficient output.

Firms produce below minimum ATC in the long run, leaving unused productive capacity.