ECON 1201 Lecture Notes - Lecture 10: Perfect Competition, Takers, Taipei Metro
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ECON 1201 Full Course Notes
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Consumer"s" objective is to maximize utility subject to budget. They decide how much to consume given the price of the product and their income. Producer/firm"s objective is to minimize costs (maximize profit) Decisions that firms make and influence cost of production. What the price the product should be. Do not influence market price of a product. Assumes a large number of sellers and buyers. Can influence market price of a product. Assumes only one seller with no close substitute. Occurs before entry or exit of firms takes place. Occurs after all entry or exit of firms takes place. Fixed cost - independent of output (or level of production) Fixed cost + variable cost = total cost (we won"t discuss the cost associated with economic profit because we won"t discuss economic profit) Average fixed cost = fixed cost / quantity. Average variable cost = variable cost / quantity. Average fixed cost + average variable cost = average cost.