ECON 201 Lecture Notes - Lecture 9: Average Variable Cost, Profit Maximization, Perfect Competition
Document Summary
Maximizaion proit maximizaion in this class always refers to economic proit, which is revenue minus opportunity cost. Difers from business proit, which only subtracts of explicit costs from revenues. Max (q) = tr(q) - c(q) 2 i. tr(q) funcion ii. Mc at higher and higher quaniies: in this fashion, the relaionship between market price and proit-maximizing quanity is traced out. This is the perfectly compeiive irm"s supply curve: if the prices of inputs (factor prices) increase, a irm"s producion costs rise and its supply shits let. Short-run market supply (idenical firms) the market supply curve is the horizontal sum of the irm supply curves. Short-run market supply (diferent firms: the market supply curve is the horizontal sum of the irm supply curves. Equilibrium deiniion: a short run perfectly compeiive equilibrium occurs when the market quanity demanded equals the market quanity supplied. and qs i (p) is determined by the irm"s individual proit maximizaion condiion.