ECO100Y1 Lecture Notes - Lecture 11: Perfect Competition, Price Discrimination, Market Power
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Eco(cid:1005)(cid:1004)(cid:1004): ex(cid:272)lusi(cid:448)e fo(cid:272)us (cid:449)ill (cid:271)e on the (cid:862)(cid:272)onstant (cid:272)ost(cid:863) (cid:272)ase. A perfectly competitive industry is in long-run equilibrium. Each firm is identical, and costs do not change as firms enter or exit the industry. Due to new technology, the mc of producing each unit of output falls by for all firms. Answer: falls by at all levels of output. Answer: falls by [since p=atc in long-run equilibrium so that earning zero economic profits] An author receives royalties equal to 15% of the revenues from the sale of her books. Which is higher: the price the publisher will set, the price the author would like the publisher to set. Profit-maximization: when mr=mc and then set the price using the dd curve. Author would set the revenue-maximizing price (which is lower) Revenue-maximization: when mr of the last book sold is zero. See diagram (assume mc of producing a book is )