Econ 102 notes 4-20-09

Econ 102 notes 4-20-09 - At the profit-maximizing level of...

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Econ 102 Chapter 14 Week of 4/20/09 Firms in Competitive Markets Competitive Market= A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker A.k.a. a perfectly competitive market Firms can freely enter or exit the market. Buyers are price takers Average revenue= total revenue / quantity sold Average revenue equals the price of the good. Marginal revenue= the change in total revenue from an additional unit sold. Marginal-cost curve is upward sloping Average-total-cost curve is U-shaped Price takers have horizontal lines: no matter what the output, price remains the same. If marginal revenue is greater than marginal cost, the firm should increase its output If marginal revenue is less than marginal cost, the firm should decrease its output
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Unformatted text preview: At the profit-maximizing level of output, marginal revenue equals marginal cost Shutdown= a short-run decision not to produce anything b/c of market conditions Exit= a long-run decision to leave the market Sunk cost= a cost that has already been committed and cannot be recovered I.e. the last 2 years Ive spent at college, b/c I cant get those back (theoretically) REMEMBER: ECONOMIC PROFIT IS DIFFERENT FROM ACCOUNTING PROFIT Marginal Firm= the firm that would exit the market if the price were any lower. Because firms can enter and exit more easily in the long run than in the short run, the long-run supply curve is typically more elastic than the short-run supply curve. VC= AVC x Q...
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This note was uploaded on 07/29/2009 for the course ECON 102 taught by Professor Clague during the Spring '08 term at San Diego State.

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