If this condition did not hold the firm could always

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Unformatted text preview: below the market price then the quantity demanded from the firm is the entire market quantity- demanded • So what is the demand curve faced by the individual firm? • 22.3. The supply decision of a competitive firm Competitive firm’s maximization problem: max py – c(y) (maximize profit) Q: What level of output does it choose to produce? A: It will operate where marginal revenue equals marginal cost—where the extra revenue gained by one more unit of output just equals the extra cost of producing another unit. If this condition did not hold, the firm could always increase its profits by changing its level of output. MR = MC In the case of a competitive firm, marginal revenue is simply the price: MR = p à༎ Choose t...
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This note was uploaded on 02/25/2014 for the course ECON 212 taught by Professor Mirobins during the Spring '08 term at Mt. Holyoke.

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