ECO 201 Lecture Notes - Lecture 11: Average Variable Cost, Marginal Revenue, Market Power

41 views2 pages
30 Dec 2017
Department
Course
Professor

Document Summary

Many firms selling identical products to many buyers. Established firms don"t have advantages over new ones. Sellers and buyers are well informed about prices. Occurs when minimum efficient scale is relative to market demand. As minimum efficient scale increases relative to market demand, the number of firms decreases. In perfect competition, each firm is a price taker. Each firm produces a perfect substitute and demand is perfectly elastic. A firm"s marginal revenue is change in total revenue resulting from a one unit increases in quantity sold. At low level outputs, the firm incurs an economic loss. Profit maximized by producing the output at which product = marginal revenue. Profit = production minus average total cost times quantity. =production minus average variable cost times quantity minus total fixed cost. If production is less than minimum of average variable cost, the firm shuts down temporarily and incurs a loss equal to total fixed cost.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related textbook solutions

Related Documents

Related Questions