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AMEX: The common abbreviation for the American Stock Exchange, which is one of three national stock markets in the United States (see National Association of Securities Dealers and New York Stock Exchange) that trade ownership shares in corporations. In terms of daily stock transactions and the number of stocks listed, the American Stock Exchange is the smallest of these three. However, it's composite index of stock prices -- AMEX is considered important enough to be flashed briefly on the nightly news.

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Lesson 16: Perfect Competition | Unit 4: Long-Run Equilibrium Page: 21 of 28

Topic: Entry And Exit <=PAGE BACK | PAGE NEXT=>

  • One of the key characteristics of perfect competition is perfect resource mobility.

  • The phrase that captures the mobility of resources in a perfectly competitive industry is entry and exit. It works like this:

    • New firms will enter the industry if economic profit is positive.
    • Existing firms in the industry exit if economic profit is negative.
    • Firms will neither enter nor exit an industry if economic profit is zero and all firms earn a normal profit.

  • The movement of firms into and out of the industry guarantees one outcome -- zero economic profit.

  • Zero economic profit is achieved when the market price is equal to average cost -- both short run (SRATC) and long run (LRAC).


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SUBSTITUTE GOOD

In general, one of two (or more) goods that are related in an either/or fashion. In terms of demand, substitute goods are those that provide the same basic satisfaction of a want or need when consumed. In terms of supply, substitute goods are those that use the same resource for production in an exclusionary manner. A substitute good is one of two ways that goods are related. The other is a complement good.

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Today, you are likely to spend a great deal of time at a dollar discount store hoping to buy either a birthday gift for your mother or a weathervane with a horse on top. Be on the lookout for fairy dust that tastes like salt.
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John Maynard Keynes was born the same year Karl Marx died.
"Think not of yourself as the architect of your career but as the sculptor. Expect to have to do a lot of hard hammering and chiseling and scraping and polishing. "

-- B. C. Forbes, founder, Forbes magazine

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