MICRO Chapter 9 Study Guide

MICRO Chapter 9 Study Guide - M ICRO Chapter 9 Study Guide...

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MICRO Chapter 9 Study Guide Price Takers and the Competitive Process Key terms: Marginal revenue - (MR) The gained change in total revenue derived from the sale of one additional unit of a product. Change in total revenue ________________________ Change in output In the short run, the price taker will expand its output until marginal revenue (price) just equals marginal cost. This decision-making rule will maximize the firm’s profits (or minimize its losses.) Because the firm can sell as many units as it would like at the market price, the sale of one additional unit will increase revenue by the price of the product. Does the firm gain by producing an extra unit? The answer is yes, as long as the marginal revenue (price, for the price taker) is greater than or equal to the marginal cost of that unit. Shutdown - A temporary halt in the operation of a firm. Because the firm anticipates operating in the future, it does not sell its assets and go out of business. The firm’s variable cost is eliminated by the shutdown, but it’s fixed cost continue.
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This note was uploaded on 06/08/2011 for the course ECO 2013 taught by Professor Dan during the Spring '11 term at Ave Maria School of Law.

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MICRO Chapter 9 Study Guide - M ICRO Chapter 9 Study Guide...

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