Class Notes (838,076)
Canada (510,662)
Economics (1,296)
ECN 104 (447)
Lecture 6

Ecn Week 6.docx

5 Pages
69 Views
Unlock Document

Department
Economics
Course
ECN 104
Professor
Debapriya Sen
Semester
Fall

Description
Ecn Week 6 October 9, 2013 7:48 AM • 1 seller is a monopoly, few competing firms is an oligopoly and many sellers is a perfect competition • Perfect competition o In a perfectly competitive market, there is a large number of competing firms o Each firm is small compared to the market size and can't control the price o Price Taking Behaviour each firm takes the market price as given. Any firm can sell at any price without altering the price • Objective of a Firm o To maximize profit o Profit function at any Q≥ 0 Q= number of units to sell o Let price = P o C Q cost of producing Q units o The profit function Q = P*Q - CQ o Objective: Choose Q to maximize πQ • Average Revenue: (AR) o Total revenue = P*Q o Average revenue = P*Q/Q = P • Marginal Revenue (MR) o Revenue from the last unit sold o For perfect competition, MR=AR=P • Average & Marginal Cost o Avg Cost (AC) = total cost of producing Q units/Q o Marginal Cost (MC) = cost of producing the last unit • Average Marginal costs Cost o For small values of Q, AC falls then it reaches a minimum & rises again o Firms achieve the "most efficient point" (minimum avg cost) • We know for a perfectly competitive market AR = MR = P • Total cost of producing Q units = area under the MC curve until point Q o Suppose we are given a u-shaped MC curve. Total cost of producing Q1 units = ? • Now we put both graphs together… Price /Cost What is the value of Q where profit (difference between reve
More Less

Related notes for ECN 104

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