ECON 101 Lecture Notes - Lecture 21: Marginal Revenue, Marginal Cost, Demand Curve
Document Summary
Tc = atcxq = 7. 5x500 = 3750. Tvc = avcxq = 4x500 = 2000. Tfc = 3750 2000 = 1750. Mc, not atc, is relevant cost concept. What is the additional cost to producing 1 more tv. Tc to produce 40 tvs = 1600, tc for 41 tvs = 1681. There is a fixed and variable factor of production. Marginal product of the variable factor eventually diminishes law of diminishing returns. Marginal cost of producing additional outputs eventually increases. Competitive market = a market with many buyers and sellers offering the same good so each one has a negligible impact on the market price. Supply curve only exists in perfectly competitive markets. For economic profits to exist in the long run, obstacles to entry must exist. Each firm takes the market price as given no firm can have an impact on market price. Each firm has an infinitely elastic demand curve.
