Chapter10_H6 - 6E:001 Principles of Economics Spring 2008...

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1 6E:001 Principles of Economics Spring 2008 Chapter 10 – Perfect Competition Ch.10 2 What’s Ahead { From Chapter 8 -- A profit maximizing firm chooses output such that MC = MR { Now a closer look at the environment in which a firm operates: z The impact of the environment on the behavior of the firm z The interaction of all the firms in the industry { We’ll find z The supply curve of the firm z The equilibrium for the industry Ch.10 3 The Environment – One Firm or Many Firms { Ch. 10 – Perfect Competition: z many firms z identical products z perfectly elastic demand { Ch. 11 – Monopoly: z One firm z Downward sloping demand { Ch. 12 – Oligopoly and Monopolistic Competition z More than one firm z Downward sloping demand Ch.10 4 What to look for in Ch 8 { Characteristics of Perfectly Competitive (PC) Industry Behavior of PC firm in short run { Under PC, Firm’s demand is perfectly elastic { E = Î MR = AR = P { Profit Max Î MC = MR = P Î MC curve is supply curve { In short run, produce even if profit < 0, provided variable costs are covered { Shutdown Point: When P < AVC Ch.10 5 What to look for (continued) Behavior of PC Industry in short run
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This note was uploaded on 03/28/2008 for the course ECON 06E:001:AA taught by Professor Nelson during the Spring '08 term at University of Iowa.

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Chapter10_H6 - 6E:001 Principles of Economics Spring 2008...

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