ECON 1B03 Lecture Notes - Lecture 8: Average Variable Cost, Economic Equilibrium, Marginal Revenue
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ECON 1B03 Full Course Notes
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A perfectly competitive market has the following characteristics; There are many buyers and sellers in the market. Market demand and supply determine price and every buyer and rm takes the market equilibrium price as given- they are price takers. The goods offered by the various sellers are homogeneous (identical) Firms can freely enter or exit the market. There are no barriers to entry such as patents, exclusive rights to a key input to production, etc. Total revenue (tr) for a rm is the selling price times the quantity sold. Since p is a given (a number), the. Total revenue curve is a linear function of q. Here is a drawing of a total revenue and a typical total cost curve. Average revenue, ar, tells us how much revenue a rm receives for the typical unit sold. Average revenue is total revenue divided by the quantity sold. Marginal revenue: the change in total revenue from an additional unit sold.