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Unformatted text preview: MR = Change in TR / Change in Quantity Or (Price)(Change in Quantity) / (Change in Quantity) = PRICE MR = PRICE (**All in Perfect Competition**) The marginal revenue curve shows MR at each level of output. Output is the independent variable and MR Is the dependent variable. For a competitive firm, MR is constant. IMPORTANT POINT In perfect competition, MR and AR are always equal and constant for a firm. The sense of this is that a competitive firm can always sell additional units of output at the going market price. D = P = AR = MR THE STANDARD PROBLEM FOR THE FIRM Objective (Goal): MAXIMIZE PROFITS ALTERNATIVE PROFIT MAXIMIZATION – MARGINAL ANALYSIS Green Rule: Profit maximization where: MR = MC If MR > MC Increase Output If MR < MC Decrease Output If MR = MC, then profit MAX WHAT IS UNCLE JOHN’S MR?...
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This note was uploaded on 10/13/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.
- Spring '10