Market Structure - Market Structure, Strategic Behavior,...

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Market Structure, Strategic Behavior, and Pricing Perfect Competition
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Profit-Maximizing Firms in Perfectly Competitive Markets The Characteristics of Perfect Competition 1. All firms sell the same standardized product. 2. The market has many buyers and sellers, each of which buys or sells only a small fraction of the total quantity exchanged. 3. Productive resources are mobile – producers and consumers can enter or exit the market any time. Free Entry and Exit. 4. Buyers and sellers are well informed
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The Perfectly Competitive Market A market in which no individual supplier has significant influence on the market price of the product Firms are Price Takers A price taker is a firm that has no influence over the price at which it sells its product
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The Output Decision of a Perfectly Competitive Firm
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Notice that for the Perfectly Competitive Firm P=MR=D To maximize profit, the perfectly competitive firm will set its output level where P=MC
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The Output Decision for the Perfectly Competitive Firm in the Short Rum
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Profit in Terms of Revenue and Average Costs Profits = TR – TC TR = P x Q TC = ATC x Q (given that ATC = TC/Q) We can re-define Profit = (P x Q) - ( ATC x Q ) To be profitable P > ATC
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0.12
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This note was uploaded on 04/07/2008 for the course ECON 2010 taught by Professor Devkota during the Spring '08 term at Rensselaer Polytechnic Institute.

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Market Structure - Market Structure, Strategic Behavior,...

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