{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter 14 Notes

Chapter 14 Notes - Chapter 14 Characteristics of perfect...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 14 - Characteristics of perfect competition o Many buyers and sellers o The goods offered for sale are largely the same o Firms can freely enter or exit the market. o Because there are many buyers and sellers along with the goods being offered being similar, each buyer and seller is a price taker in a perfect competition market. - The revenue of a competitive firm o Total Revenue (TR) TR = P x Q Average revenue (AR) o AR = TR/Q Marginal Revenue o Change in total revenue / change in quantity - MR – P for a competitive firm o A competitive firm can keep increasing its output without affecting the market price. o So, each one-unit increase in Q causes revenue to rise by P. o Only true for firms in competitive markets. - If you increase your quantity by one unit, revenue rises by MR, cost rises by MC. - MC = TC2-TC1 - Three general rules for profit maximization If marginal revenue is greater than marginal cost, the firm should increase its output.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 3

Chapter 14 Notes - Chapter 14 Characteristics of perfect...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon bookmark
Ask a homework question - tutors are online