Chapter 8

Chapter 8 - Chapter 8 11/30 Market structure Important...

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Chapter 8 – 11/30 Market structure – Important features of a market, such as the number of firms, product uniformity across firms, firms’ ease of entry and exit, and forms of competition Perfect Competition – A market structure with many fully informed buyers and sellers of a standardized product and no obstacles to entry or exit of firms in the long run Commodity – A standardized product, a product that does not differ across producers, such as bushels of wheat or an ounce of gold Price Taker – a firm that faces a given market price and whose quantity supplied has no effect on that price; perfectly competitive firm Marginal Revenue – The change in total revenue from selling an additional unit; in perfect competition, marginal revenue is also the market price Golden Rule of Profit Maximization – To maximize profit or minimize loss, a firm should produce the quantity at which marginal revenue equals marginal cost; this rule holds for all market structures Average Revenue
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Chapter 8 - Chapter 8 11/30 Market structure Important...

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