Economics Notes 9.28.07

Economics Notes 9.28.07 - 3 $50 $150 For competitive firms,...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Q$ Most of the burden will fall on the party least responsive to the price change |E D | = 0.8 Es = 1 Tax = $ Subsidy encourages more consumption and production Characteristics: 1. Many buyers and sellers 2. Homogeneous product Buyers and sellers are price takers 3. Easy to enter and exit the market Short Run Decisions Long Run Decisions At least 1 fixed input every input is variable No firms can enter or exit allow for entry/exit Every firm’s goal is to maximize profit Pi sign = profit Max profit = TR-TC Marginal revenue = change in total revenue / output change
Background image of page 1

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

View Full DocumentRight Arrow Icon
Marginal cost = change in total cost/ change in output = change in total variable cost/change in output = wage rate/marginal product of labor MKT Firm – price taker Marginal Cost $50 D (=Marginal revenue) Firm’s Revenue / Marginal Revenue schedule Q P TR MR = delta TR/delta Q 0 $50 $0 -- 1 $50 $50 (50-0)/1-0= $50 2 $50 $100 (100-50/2-1)=$50
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3 $50 $150 For competitive firms, Marginal revenue = price for each quantity Marginal Revenue Marginal Cost = Marginal profit Profit maximization occurs where MR = MC all market structures | |-- P = MC if and only if you are a competitive firm Total fixed cost = $1000 Profit = total revenue total cost = total revenue (total fixed cost + total variable cost) = total revenue total variable cost Produce where MR = P = MC If and only if TR > TVC P > AVC TFC = $1000, P=$50 P=MR = MC where output (Q) = 200; AVC (Q=200) - $55 Should you produce or not? No, because price does not cover AVC Shut down Q = 0, Loss = $1000 Pi = TR-TC = $50(200)-TFC-TVC-$1000-$55(200) = -$2000 Farmer Jacks Costs AVC=TVC/Q Q AVC MC--1000 $2 $2 1800 $2.22 $2.50 2400 $2.50 $3.33 MC AVC...
View Full Document

This note was uploaded on 03/31/2009 for the course ECON 101 taught by Professor Balon during the Spring '09 term at Linn Tech.

Page1 / 3

Economics Notes 9.28.07 - 3 $50 $150 For competitive firms,...

This preview shows document pages 1 - 3. Sign up to view the full document.

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