12-2-09 - In the market for F of P • Supply = households...

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12/2/09 Monopolies The reason for the Marginal revenue being parallel to the demand curve is that we assume the monopolist is charging the same amount to each customer. (In a competitive market, the firm faces a horizontal and flat demand which ensures a constant price.) Price discrimination is selling the same good at different prices to different buyers. The characteristic used in price discrimination is the willingness to pay (WTP) If there is perfect price discrimination, they have taken away your entire consumer surplus. Chapter 18- Firms use factors of production to produce goods and services which households buy in the market for good and services with the income they received from the market for factors of production. Factors of Production- inputs used to produce goods and services. Land, Labor and Capital.
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Unformatted text preview: In the market for F of P: • Supply = households • Demand = Firms Demand for a F of P is a derived demand- it is derived from a firm’s decision to supply a good to the market. Assumptions: 1. all markets are competitive a. Market for goods and services b. Market for factors of production 2. Firms care only about maximum profit. a. Supply of their output and demand for inputs are derived from this goal. If the marginal benefit of an additional worker is greater than the marginal cost of that worker, then the worker will be hired. MB>MC-Cost of an additional worker = wage. -Benefit of an additional worker = the value of the goods the additional worker can produce....
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