lecture_8 - Competitive markets A (perfectly) competitive...

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ECON 1001 LECTURE 8 1 Competitive markets A (perfectly) competitive market - many buyers and sellers (all participants price takers) - homogenous goods - free entry and exit Revenues Average revenue – total revenue divided by the quantity sold Marginal revenue – the change in total revenue from an additional unit sold
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ECON 1001 LECTURE 8 2
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ECON 1001 LECTURE 8 3 Quantity (q) Price (P) TR (P*q) AR (TR/q) MR ( TR/ q) 1 20 20 20 20 2 20 40 20 20 3 20 60 20 20 4 20 80 20 20 5 20 100 20 20 6 20 120 20 20 7 20 140 20 20 8 20 160 20 20
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ECON 1001 LECTURE 8 4
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ECON 1001 LECTURE 8 5 q TR TC π MR ( TR/ q) MC ( TC/ q ) 0 0 10 -10 1 20 14 6 20 4 2 40 22 18 20 8 3 60 34 26 20 12 4 80 50 30 20 16 5 100 70 30 20 20 6 120 94 26 20 24 7 140 122 18 20 28 8 160 154 6 20 32
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ECON 1001 LECTURE 8 6
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ECON 1001 LECTURE 8 7 For a competitive firm marginal revenue equals the price of good. Profit maximisation and supply of a competitive firm π = TR – TC Produce up until MR = MC when MR > MC profit increased by producing that unit of output when MR < MC profit falls from producing that unit of output
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ECON 1001 LECTURE 8 8
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ECON 1001 LECTURE 8 9 Graphical representation of supply decision for a firm
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ECON 1001 LECTURE 8 10 The firm’s marginal cost curve is the competitive firm’s supply curve - it determines how much they are willing to supply at any price. Firm’s shut down decision
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This note was uploaded on 11/06/2011 for the course ECON 1001 taught by Professor - during the Three '07 term at University of Sydney.

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lecture_8 - Competitive markets A (perfectly) competitive...

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