Test 3 Study Guide.pdf - Stephen Grant Test 3 Study Guide...

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Stephen Grant Test 3 Study Guide Perfect Competition: 1. Many small firms 2. Homogenous product 3. No brand names or logos or trademarks 4. No barriers to entry or exit 5. Everyone is a price taker MR MC Do it MR < MC Don’t do it Keep producing output until MR=MC MR = TR/ Q MR – MC = MP (M π ) π means profit π = TR – TC π = (P x Q) – (ATC x Q) π = Q x (P – ATC) π = Q x A π Q* = Profit Max Quantity Q* at MR = MC Economic Profit: Making more money at what you’re doing/producing than any other alternative MC and ATC contain All Economic Costs: Implicit + Explicit
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Stephen Grant Number 33 on the exam: Firm’s Output in Long Run Competitive Equilibrium Monopoly: Mono = One Poly = Seller 1. One Big Firm 2. Differentiated Product 3. Barrier to Entry 4. Downward-Sloped Demand Curve In a Monopoly: Industry Demand Curve = Firm Demand Curve Decreasing ATC curve over time When MR = 0, elasticity = 1
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Stephen Grant If you have a straight-line demand curve Marginal Revenue will always have twice the slope of
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