Chapter 22 Firm Supply - Chapter 22 Firm Supply 22.1)Market...

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22.1) Market Environments a) Firms face technological constraints, where technological constraints lead to economic constraints. b) Market constraint: A firm can only sell as much as people are willing to buy. c) Market environment : Ways that firms respond to each other when they make their pricing and output decisions. d) We assume pure competition for now. 22.2) Pure Competition a) Purely competitive : Each firm assumes that the market price is independent of its own level of output. Whatever it produces can only be sold at one price: the going market price. Identical product and many small firms. b) Price taker : Price is given as far as he is concerned. c) Market demand curve and demand curve facing the firm: 22.3) The Supply Decision of a Competitive Firm a) Firm wants to maximize py-c(y) b) A competitive firm gets ΔR=p Δy (Change in Revenue= price * change in output) c) Firm chooses a level output where marginal cost that it faces is just equal to market price. d)
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This note was uploaded on 10/26/2008 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).

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Chapter 22 Firm Supply - Chapter 22 Firm Supply 22.1)Market...

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