Chapter 14 Firms in Competitive Markets

Chapter 14 Firms in Competitive Markets - Chapter 14: Firms...

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Chapter 14: Firms in Competitive Markets Page 1 of 9 I. Competitive Markets (A.K.A. Perfect Competition) A. Conditions: 1. Standardized Product: the good by the various sellers are essentially the same good. 2. Many buyers & Sellers and/or 3. Free Entry and Exit These Conditions lead to a situation where all suppliers are Price Takers!
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Page 2 of 9 II. Production and Profits Marginal Revenue: change in total revenue from an additional unit sold Perfect Competition MR = ________ !
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Page 3 of 9 If MR = P > MC the firm should ↓ or ↑ output – This tells us How Much Q If the firm produces a Q at which TR > TC the firm is making or losing $ Short Run
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Page 4 of 9 How much to produce? __________ If the firm produces a Q at which TR = TC, the firm breaks even. Price = ATC Price fell to $14
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Page 5 of 9 TR < TC or equivalently P < ATC How much is Loss? ________________________________ Stay in Business? Depends S-R Supply Curve is the MC curve above AVC, if the P falls below AVC it Shuts-Down
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This note was uploaded on 12/05/2011 for the course ECON 101 taught by Professor Dezhbakhsh during the Fall '07 term at Emory.

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Chapter 14 Firms in Competitive Markets - Chapter 14: Firms...

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