CAS AR 101 Lecture Notes - Lecture 16: Cristiano Ronaldo, Market Power, Reservation Price
26 Mar 2018
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Lecture 16: profit maximization and long-run competition: cost, revenue and profits: Ac = tc / q (differentiate between atc & avc for short & long run) P = tr tc = (p x q) tc = (p x q) (ac x q) = (p ac) x q. Ps = tr vc fc = p fc: a small firm in a competitive market: If all the firms charge p* and produce total output q0 the(cid:374) . For the last small firm remaining demand near the market price: very large and very elastic. Determines its own equilibrium quantity and charges the market price. Scenario 1: supply curve of 1 small firm shifts to the right (increasing s) Equilibrium price remains the same selling more. Scenario 2: supply curves of all firms shifts to the right. Market supply shifts equilibrium price falls. Small firm must sell at lower price: marginal and average cost: Mc: the cost of producing a given unit.
