ECN 104 Chapter Notes - Chapter 9: Profit Maximization, Marginal Cost, Product Differentiation
Document Summary
Industry very easily product by quality & design, not by price; fairly easy for new firms to enter the market other firms is blocked; monopolist produces a unique product. Chapter 9 perfect competition the short run. 9. 3 demand for a firm in perfect competition differentiated products; product differentiation - firms distinguish their each firm is affected by the decisions of rivals. All firms in the industry acting independently but simultaneously can increase the price by reducing their output and changing the demand of the good/service, but an individual firm cannot. 9. 4 profit maximization in the short run. Perfectly competitive firms can only maximize economic profit (or minimize economic loss) by adjusting output. Since plant capacity is fixed in the short run, must adjust variable inputs (materials, labour, wages) Mc curve is the supply curve of the firm shows how many units a firm will produce at a series of prices in a given time period (the short run)