| A | B |
|---|
| Qmax | the profit maximizing level of output |
| Short-run shut down | the lowest point price can fall (equal to minimum AVC) and the firm may still remain in business in the short run |
| Short-run positive economic profits | when price is greater than ATC at Qmax |
| Price Taker | The idea that perfect competitors must take their price from the market rather than determining one of their own |
| Easy Entry; Easy Exit | The idea that perfect competitors may freely enter and leave the industry depending upon the existence of profits. There are no barriers! |
| Legal Restrictions | Licenses, patents, copyrights, certificates of convenience and public necessity |
| economies of scale | the idea that a firm may actually be able to make more product and drive their production costs down (rather than up) over a long stretch of productivity |
| agricultural products | probably the most realistic example of perfect competition |
| P > ATC | positive economic profits |
| P < ATC but > AVC | Loss minimization |
| P = AC | Long-run normal profits |
| MR < P < D | Because the monopolist must lower its price on all units in order to sell more items |
| Price Discrimination | The selling of the SAME product for two different prices, those prices having nothing to do with differences in production costs |
| Price Differentiation | The charging of two different prices for the SAME product because production costs may vary |
| Perfectly Elastic | the demand curve that the perfectly competitive firm faces |
| Relatively Inelastic | the monopolist's demand curve |
| relatively elastic | the monopolistic competitor's demand curve |
| "Kinked" | the oligopolist's demand curve |
| Significant amounts of advertising | typical activity for the monopolistic competitor |
