MGEC40H3 Lecture Notes - Marginal Revenue, Marginal Cost, Perfect Competition

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orchiddinosaur46

24 Jun 2014

School

UTSC

Department

Economics for Management Studies

Course

MGEC40H3

Professor

Victor Yu

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Document Summary

This chapter reviews basic of microeconomic concepts that we will use in this course. These include costs, demand, and its relationship to revenues, pricing and output choice by a profit-maximizing firm, perfect competition, and game theory. Total cost functions are used to give an idea of the relationship between total costs and output produced in a given time period. The total costs are a function of fixed and variable costs. Marginal costs refer to the rate of change of total cost with respect to output. When average cost is a decreasing function of output, marginal cost is less than average cost. When average cost neither increases nor decreases in output because it is either constant (independent of output) or at a minimum point marginal cost is equal to average cost. When average cost is an increasing function of output, marginal cost is greater than average cost.

Related Questions

1. If marginal cost is less than average total cost, then:

A. average total cost is increasing with output.
B. average total cost is decreasing with output.
C. average variable cost is increasing with output.
D. average variable cost is decreasing with output.

2. The law of diminishing marginal productivity:

A. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will fall.

B. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will rise.

C. explains why marginal costs of production fall as additional units of output are produced.

D. explains why average productivity always rises.

azuremuskrat765

(a) Explain the difference between average, total, and marginal revenue? What is the shape of the total and marginal revenue curves for the individual perfectly competitive firm? [5marks]

(b) Why does price equal marginal revenue for the perfectly competitive firm? What is the relationship to the demand curve for the firm? [5marks]

(d) What conditions are necessary to determine if the purely competitive firm should produce in the short run? State the marginal revenue and marginal cost conditions and the total revenue and total cost conditions.

orchidmule290

(1) With a given plant size, an increase in output will NOT result in an increase in,
a. average variable cost
b.total cost
c.total fixed cost
d.average fixed costs

(2) The change in total variable cost which accompanies one extra unit of output
a.marginal cost
b.the average variable cost
c.the average total cost
d.the average fixed cost

(3) When the total product is rising,
a. variable cost must be declining
b. the marginal cost must be positive
c. the marginal product must be negative.

d. fixed cost must be rising

(4) For a perfectly competitive firm,
a. price is less than marginal revenue
b.there is no relationship between price and marginal revenue
c. price is greater than marginal revenue
d.price equals marginal revenue

silverbat234

MGEC40H3 Lecture Notes - Marginal Revenue, Marginal Cost, Perfect Competition

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