ECON101 Lecture Notes - Lecture 9: Monopoly Profit, Average Variable Cost, Marginal Revenue

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Predrag Rajsic

Document Summary

Many firms sell identical products to many buyers. Established firms have no advantage over new ones. Sellers and buyers are well informed about prices. Minimum efficient scale of a single producer is small relative to the market demand for the good or service: minimum efficient scale: smallest output at which long-run average cost reaches its lowest level (lram lowest) Firm that cannot influence the market price because its production is an insignificant part of the total market. Firm"s goal: maximize economic profit: total revenue total cost, total cost = opportunity cost of production (includes normal profit) Total revenue: price of output multiplied by number of units sold (price x quantity) Marginal revenue: change in total revenue that results from a one-unit increase in quantity sold: divide change in total revenue by change in quantity sold. Equal to price multiplied by quantity sold. Change in total revenue that results from a one-unit increase in quantity sold.