Class Notes (836,863)
Canada (509,936)
Economics (1,617)
ECON 1B03 (523)
Lecture 8

ECON 1B03 Lecture 8: Micro Unit 8
Premium

3 Pages
34 Views
Unlock Document

Department
Economics
Course
ECON 1B03
Professor
Hannah Holmes
Semester
Winter

Description
Unit 8 Perfectly Competitive Markets AR = TR/Q = PQ/Q = P Marginal Revenue: change in total revenue from an additional unit sold MR = change in TR / change in Q MR is the slope of the TR function MR = P, *** only true for perfectly competitive firms that are price takers A profit-maximizing firm will produce a quantity of output at the point where MR=MC ^ True for all firms not just competitive firms ** In perfect competition only, a firm will produce where P = MR = MC or P = MC When MR > MC, firm should increase Q When MR < MC, firm should decrease Q When MR = MC, profit it maximized at Q Individual firms supply curve is its MC curve (not market supply) SR Shutdown Companies may choose to temporarily shutdown due to market conditions ⁃ negative advertising could lead to a decrease in demand and drop in market price of firms good ⁃ firm expects effect of advertising will wear off, demand will rise again and therefore price will rise again ⁃ then firm plans to reopen ⁃ Example Maple Leaf’s cold cut products a little while back ⁃ Shutting down may cause loss of customers in a competitive market ⁃ A firm will continue to have to pay its fixed costs even if it shuts down ⁃ If a firm can afford to pay for its variable costs it should still stay open ⁃ Firm shuts down if TR
More Less

Related notes for ECON 1B03

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit