ECON 230D1 Lecture Notes - Lecture 6: Average Variable Cost, Market Power, Perfect Competition
23 Nov 2017
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Chapter 8 competitive firms and markets: perfect competition, profit maximization, competition in the short-run, the long run (chapter 6, 7, & 8) Deviations from perfect competition: many markets do not exhibit all characteristics of perfect competition but are still competitive. Profit: economic profit revenue minus economic cost. (revenue economic costs (includes explicit and implicit costs)) If the profit is less than zero, we say the firm makes a loss. Two steps to maximizing profit: output decision level of q that maximizes its profit and minimizes its losses, should i e(cid:374)ter or e(cid:454)ist the (cid:373)arket if profits are(cid:374)"t (cid:271)ei(cid:374)g (cid:373)ade or have the potential to be made. Mr=p: marginal profit the change in profit a firm gets from selling one more unit of output = The following shut-down rules apply to both firms in the short run & the long run. Shutdown rule 1 the firm shuts down only if it can reduce its loss by doing so.
