177 Glossary: Perfect Competition
entry
- the long-run process of firms entering an industry in response to industry profits
- exit
- the long-run process of firms reducing production and shutting down in response to industry losses
- long-run equilibrium
- where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC
- marginal revenue
- the additional revenue gained from selling one more unit
- market structure
- the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold
- perfect competition
- each firm faces many competitors that sell identical products
- price taker
- a firm in a perfectly competitive market that must take the prevailing market price as given
- shutdown point
- level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately
