445 Ch 2

445 Ch 2 - 2.1 Perfect Competition A perfectly competitive...

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2.1 Perfect Competition A perfectly competitive market has a horizontal demand curve. When a firm does not earn any economic profit, it does not mean that its stockholders  go away empty handed. It simply means that those stockholders do not earn more than  a normal return on their investment.  The  Marginal Revenue for a competitive firm is just MR(q)=P For each firm the price received for a unit of output exactly equals the cost of producing  that output at margin.  Hence, in a competitive equilibrium each firm must product at a point where its  marginal cost is just equal to its price. P=MC(q), this is for short-run In the  long-run,  the price of the good must just equal the average or per unit cost of  producing the good.  2.1.2 Monopoly The monopolist revenue curve must then lie everywhere below the inverse demand  curve.  Profit-Maximization  occurs at the point where MR=MC, this is true for both the 
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This note was uploaded on 02/23/2012 for the course ECON 445 taught by Professor Mcmanus during the Summer '08 term at UNC.

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445 Ch 2 - 2.1 Perfect Competition A perfectly competitive...

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