Chapter 22 - Chapter Twenty-Two Firm Supply Firm Supply How...

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Chapter Twenty-Two Firm Supply
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Firm Supply How does a firm decide how much product to supply? This depends upon the firm’s technology market environment goals competitors’ behaviors
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Market Environments Pure Competition: Many firms, all making the same product. Each firm’s output level is small relative to the total.
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Pure Competition A firm in a perfectly competitive market knows it has no influence over the market price for its product. The firm is a market price-taker. The firm is free to vary its own price.
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Pure Competition If the firm sets its own price above the market price then the quantity demanded from the firm is zero. If the firm sets its own price below the market price then the quantity demanded from the firm is the entire market quantity- demanded.
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Pure Competition y $/output unit p e p’ At a price of p’, zero is demanded from the firm. Market Demand
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Pure Competition y $/output unit p e p’ p” At a price of p” the firm faces the entire market demand. Market Demand
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Pure Competition Y $/output unit p e p’ p” Market Demand
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Smallness What does it mean to say that an individual firm is “small relative to the industry”?
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Smallness $/output unit y
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This note was uploaded on 06/18/2010 for the course ECOS 2001 taught by Professor None during the Three '09 term at University of Sydney.

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Chapter 22 - Chapter Twenty-Two Firm Supply Firm Supply How...

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