ECO101H1 Lecture Notes - Perfect Competition, Demand Curve, Marginal Revenue
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ECO101H1 Full Course Notes
Supply curve: exists only in perfect competition, reflects profit-maximizing behaviour. There is a sharp increase in the demand for organic foods. Answers: yes, no (as other farmers switch to organic crops, until the economic profits are competed away) For economic profits to persist over the long run, there must be obstacles (barriers to entry) that prevent new firms from entering and competing. Key features: each firm is a price taker and faces a perfectly elastic demand curve at market price, the number of firms is fixed in the short run, but can vary in the long run. D = market demand curve d = individual demand curve. The price elasticity of demand faced by an individual coffee grower is closest to: 0. 01, 0. 10, 1. 0, 10. 0, 1,000. Total revenue, average revenue, marginal revenue for perfectly competitive firm: Mr is unchanged because of perfectly competitive demand curve.