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Lecture 7

Lecture 7, Chapter 9 (Perfect Competition and the Supply Curve)

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BUSI 2050U
Ashfakuddin Rubel

Chapter 9 Perfect Competition and the Supply Curve Perfect Competition 1 Abundant buyers and sellers with individual market shareMarket sharea portion of the total industry output reported by that producers outputMeaning both seller and buyer are price takers their actions have no effect on price 2 The product is consistent among the sellersStandardized productConsumers see various sellers products as the same 3 Free Entry and ExitFree ee new produces can easily enter in an industry and existing producers can leave easily vice versa Perfect Comp ContdA pt producer whose actions have no effect on the market price of the good it sellsA pt consumer is a consumerhe or she buysA perfectly competitive market is a market in which all market participants are ptA perfectly competitive industry is when producers are the ptProduction and ProfitsEach firm is a pt each firms Total Rev will be equal to price x quantity sold TRPxQAnd PTRTCUsing Marg Analysis to Maximize Profit P is the greatest at Q5 which is also the point where the marg costmarg revMarg Rev and the Optimal Output RuleMarg Rev in TR generatedextra unit of output MRTRQ o For pt firms marg rev is simply the goods market profitOptimal output rule P is max by producing the Q of output at which the marg rev of the last unit produced isto Marg Rev
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