Ch26 - Chapter Twenty-Six Factor Markets A Competitive...

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Chapter Twenty-Six Factor Markets
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A Competitive Firm’s Input Demands A purely competitive firm is a price- taker in its output and input markets. It buys additional units of input i until the extra cost of extra unit exceeds the extra revenue generated by that input unit. MRP x w i i i ( ) * =
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A Competitive Firm’s Input Demands For the competitive firm the marginal revenue of a unit of input i is MRP x p MP x i i i i ( ) ( ). = ×
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A Monopolist’s Demands for Inputs What if the firm is a monopolist in its output market while still being a price-taker in its input markets?
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A Monopolist’s Demands for Inputs Suppose the firm uses two inputs to produce a single output. The firm’s production function is So the firm’s profit is y f x x = ( , ). 1 2 Π ( , ) ( ) . x x p y y w x w x 1 2 1 1 2 2 = - -
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y f x x = ( , ). 1 2 Π ( , ) ( ) . x x p y y w x w x 1 2 1 1 2 2 = - - The profit-maximizing input levels are determined by
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This note was uploaded on 01/06/2012 for the course ECON 102 taught by Professor Goodhart during the Spring '11 term at Abu Dhabi University.

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Ch26 - Chapter Twenty-Six Factor Markets A Competitive...

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