Econ 160 Chapter 14 Notes; firms in competitive markets - Yaron Rubin Microeconomics 160 CHAPTER 14 Firms in Competitive Markets What is a Competitive

Econ 160 Chapter 14 Notes; firms in competitive markets -...

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Yaron Rubin Microeconomics 160 CHAPTER 14: Firms in Competitive Markets What is a Competitive Market? o The Meaning of Competition Competitive market - a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker Actions of any given seller or buyer is negligible Firms can freely enter or exit the market o The Revenue of a Competitive Firm Competitive market firms try to maximize profits Average revenue -total revenue divided by quantity sold FOR ALL FIRMS, AVERAGE REVENUE EQUALS THE PRICE OF THE GOOD Marginal revenue - the change in total revenue from an additional unit sold FOR COMPETITIVE FIRMS, MARGINAL REVENUE EQUALS THE PRICE OF THE GOOD Profit Maximization and the Competitive Firm’s Supply Curve o A Simple Example of Profit Maximization Vaca milk company o The Marginal-Cost Curve and Firm’s Supply Decision Three general rules for profit maximization
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