Title: ECO 202 Unit 3 Test Flashcards | Quizlet
Headings: ECO 202 Unit 3 Test
ECO 202 Unit 3 Test
Terms in this set (106)

Content: P = MC
Long-run equilibrium in pure competition guarantees productive efficiency, such that output will be produced in the least-cost way. But it does not guarantee that anyone will want to buy the items that are being produced in the least-cost manner. Consumer surplus in pure competition
Consumer surplus is the green triangle, which is the sum of the vertical distances between the demand curve and equilibrium price. Consumer surplus= is the difference between the maximum prices that consumers are willing to pay for a product. Producer surplus in pure competition
Producer surplus is the sum of the vertical distances between the equilibrium price and the supply curve. Producer surplus = is the difference between the minimum prices that producer are willing to accept for a product. P = MC = Lowest ATC
After long-run adjustments, Pure competition produces both productive and allocative efficiency. It yields a level of output a which P=MC= lowest ATC, marginal cost, maximum willingness to pay for the last unit = minimum acceptable price for that unit, and combined consumer and producer surplus are maximized. Creative Destruction
The innovations that firms achieve thanks to competition are considered by many economists to be the driving force behind economic growth and rising living standards. The transformative effects of competition are often referred to as creative destruction.