Microsoft PowerPoint - lecture 11 - perfectcomp

Microsoft PowerPoint - lecture 11 - perfectcomp - 2 11 - 2...

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1 Perfect Competition What is Perfect Comp? • Perfectly Divisible • Homogenous • Perfect information • Entry/Exit • Price Takers Profit Maximization • What does the demand curve for an individual firm look like? • What is the elasticity of demand for a perfectly competitive firm? • Maximize p*q – TC(q) – Price is given Perfectly Competitive Markets Price taker A buyer or seller that is unable to affect the market price. 11 - 1 A Perfectly Competitive Firm Faces a Horizontal Demand Curve a Perfectly Competitive Market Profit Total revenue minus total cost. Profit = TR - TC LEARNING OBJECTIVE
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Unformatted text preview: 2 11 - 2 The Market Demand for Wheat versus the Demand or One Farmers Wheat Dont Confuse the Demand Curve for Farmer Douglass Wheat with the Market Demand Curve for Wheat Profit Maximization Profits are maximized when marginal revenue equals marginal cost. Calculus Intuition: additional revenue exceeds additional costs, firm should increase output. What is Marginal Revenue? Produce where P = MC 2 Perfect Comp q $ Price AVC MC ATC $ Q Demand Supply Profit = ( P x Q ) TC LEARNING OBJECTIVE 3 Q Q P ) ( = Q Profit Q TC ,...
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Microsoft PowerPoint - lecture 11 - perfectcomp - 2 11 - 2...

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