Chapter8 - Part 1 - Profit Maximization and Competitive...

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Profit Maximization and Competitive Supply Chapter 8
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Introduction: A Scenario Three years after graduating, you run your own business. You must decide how much to produce, what price to charge, how many workers to hire, etc . What factors should affect these decisions? Your costs (studied in preceding chapter) How much competition you face We begin by studying the behavior of firms in perfectly competitive markets.
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Chapter Outline Perfectly Competitive Markets Marginal Revenue, Marginal Cost, and Profit Maximization Choosing Output in the Short Run The Competitive Firm’s Short-Run Supply Curve The Short-Run Market Supply Curve Choosing Output in the Long Run The Industry’s Long-Run Supply Curve
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Characteristics of Perfect Competition 1. Many buyers and many sellers. 2. The goods offered for sale are largely the same. 3. Firms can freely enter or exit the market.
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