PUBH 3130 Lecture Notes - Lecture 20: Primary Care Physician, Perfect Competition, Profit Maximization
Document Summary
The conditions under which perfect competition operates include the following: Freedom of entry and exit from the industry. Specific conditions of perfect competition to consider. Large number of firms sell identical goods or services. Each firm holds a very small market share, so no one firm is a leader in the market. Every firm in this market structure is a price taker. A firm cannot set a price that is different from that of its competitors. Entry of new firms into the industry. Increased demand for primary care physicians: short run & long. Profit maximization is that point where the cost of producing the next item is equal to the revenue received for that item. In other words, marginal cost equals marginal revenue. Marginal cost: excess capacity is defined as having more resources than are needed to produce a given quantity of output, with excess capacity, average costs will be greater than incremental costs.
