Chapter 10

Chapter 10 - 2. Threats a. Like threatening other companies...

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Chapter 10 Perfect Competition Characteristics 1. Many Firms 2. Homogenous Products a. Perfect substitutes 3. No Barriers to entry or exit a. If its perfectly competitive then anyone can join or leave the market b. What are Barriers to entry? i. Legal barriers 1. Permit, license, copyrights, patents ii. Natural Barriers 1. Cost advantages 2. Like what Microsoft says,” its not our fault we make cheaper better products, we just do it its not our fault” 3. Control of a scare resource ( like OPEC) iii. Artificial Barriers 1. Adversiting
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Unformatted text preview: 2. Threats a. Like threatening other companies that your company will under cut their prices Max Profit Profit is difference between total revenue - total cost ( TR- TC) Marginal revenue = change in TR/ change in Q Marginal Cost = change in TC / change in Q If MR> MC then Q increase maximizes profit If MR<MC then Q down to max profit IF MR= MC then no change THESE RULES ARE TRUE FOR ALL FIRMS For Perfect Competition MR=MC is also where P=MC because MR=P for perfect competition...
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Chapter 10 - 2. Threats a. Like threatening other companies...

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