chapter6

chapter6 - PerfectlyCompetitiveSupply:...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Perfectly Competitive Supply:   The Cost Side of The Market
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Profit-Maximizing Firms and Perfectly  Competitive Markets profit-maximizing firm  is one whose primary goal is  to maximize profit, i.e. total revenue minus total cost. perfectly competitive market  is one in which no  individual supplier has any influence on the market price  of the good.
Background image of page 2
Characteristics of Perfectly Competitive Market Homogeneous product Many buyers and sellers, each of which buys or  sells only a small fraction of the total quantity  exchanged Buyer and sellers are well-informed   Rapid dissemination of accurate information at low  cost Free entry and exit into the market Productive resources are mobile
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Profit-Maximizing Firms and Perfectly  Competitive Markets price taker  is a firm that has no influence over the  price of the product that it sells. Laundry Art reproduction
Background image of page 4
5 Factors of production Factors of production  are inputs used in the  production of a good or service.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Fixed factor of production fixed factor of production  is an input whose quantity  cannot be altered in the short run.  A typical fixed factor is capital E.g., buildings or plants  Example: Transmission tower for a student radio station.
Background image of page 6
7 Variable factor of production variable factor of production  is an input whose  quantity can be altered in the short run. A typical variable factor is labor  E.g., workers or raw materials or plants  Example: Music library for a student radio station.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Total Product and Marginal Product Total Product (TP) The quantity of output produced by the firm in a  given period of time. The total output is related to the input level of the  fixed and variable factors of production Marginal Product (MP) The increase in total product due to hiring of one  additional variable factor (assuming other input factors  are constant)
Background image of page 8
9 The Law of Diminishing Returns Total no. of  employees/day Total no. of  bats/Day (TP) Additional  no. of  bats/day (MP) 0 0 1 40 40 2 100 60 3 130 30 4 150 20 5 165 15 6 175 10 7 181 6 Note that output gains  begin to diminish with  the third employee.    Economists refer to this  pattern as the  law of  diminishing returns and it always refers  to situations in which  at least some factors  of production are  fixed. 
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
In Las Vegas casinos, the dollar machines (not nickel)  generate the highest profit per slot machine, why don’t  casinos maintain these nickel machines?  Why not have  all dollar machine, since that’s where they make most  money? What should federal government fund medical research: 
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/12/2012 for the course ECON 1002 taught by Professor Fu during the Winter '09 term at HKU.

Page1 / 38

chapter6 - PerfectlyCompetitiveSupply:...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online