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Unformatted text preview: 1 Econ 1, Winter 2008 RATIKA NARAG, Ph.D. LECTURE 14 Example in Previous Lecture: LECTURE 14 Calculate: –TC of producing 12 units of output –AVC, ATC, MC are increasing functions of output at level greater than? –TFC of producing 15 units of output –AVC of producing 12 units of output –At output level 5, MC > or < AC? –The slope of TVC at output level 7 is greater or smaller than 4? LECTURE 14 Calculate: – TC of producing 12 units of output = 96 – ATC = 8, TC = 8*12 = 96 LECTURE 14 Calculate: – AVC, ATC, MC are increasing functions of output at level greater than 8 LECTURE 14 Calculate: – TFC of producing 15 units of output = ? – At Q = 5,TC = 40, TVC = 20, TFC = 20 2 LECTURE 14 Calculate: – AVC of producing 12 units of output = ? – At Q=12, TC=96, FC=20, TVC=76, AVC = 76/12 = 6.33 LECTURE 14 Calculate: – At output level 5, MC < AC – The slope of TVC at output level 7 < 4 LECTURE 14 Overview of Chap 9 (02/26 – 02/28) – Perfect competition: Characteristics – Determination of profit maximizing output – SR decisions regarding production – Industry behavior in the SR and LR – What determines industry supply curve in SR and LR LECTURE 14 Perfect competition: Characteristics – Sellers are price-takers – Entry into the market is free – Buyers are price-takers Market Structure: – Large number of buyers – Large number of sellers, each with negligible market share – Standardized products – No Barriers to entry/exit LECTURE 14 A Price-Taking Firm: A firm that cannot influence the prices of its output or inputs (Why?) – It is too small in relation to the total market – A change in its own supply or demand has a negligible effect on total market supply or demand - hence no change in market price LECTURE 14 2 Necessary Conditions for Perfect Competition: – Large numbers of sellers, none of whom have a large market share – Consumers regard the products of all sellers as...
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This note was uploaded on 03/20/2008 for the course ECON 1 taught by Professor Nagata during the Fall '08 term at UCLA.
- Fall '08