{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Nov 26, Firms in Competitive Markets

Nov 26, Firms in Competitive Markets - Firms in Competitive...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Firms in Competitive Markets Context and Purpose The previous chapter developed the cost curves on which firm behavior is based. We employee these curves to show how a competitive firm responds to changes in market conditions We examine the behavior of competitive firms and shed the might on the decision that lie behind the supply curve in a competitive market. What is a competitive market? The meaning of competition The use of the word competition in economics is much differest than that in sports A perfectly competitive market has the following characteristics: o The are many buyers and sellers in the market. o The goods offered by the various sellers are largely the same. o Perfectly knowledge of price and technology o Firms can freely enter or exit the market. As a result: o The actions of any single buyer or seller have a negligible impact on the market price o The take the market price as given Total and average revenue Total revenue for a firm is the selling price times the quantity sold: TR = P * Q Total revenue is proportional to the amount of output The only way to influence total revenue for firms if by varying their level of output. Average revenue tells us how much revenue a firm receives for the typical unit sold. o Average revenue is total revenue divided by the quantity sold. o By definition, average revenue equals the price of the good.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern