BEPP 250 Lecture Notes - Lecture 8: Perfect Competition, Fixed Cost, Final Solution
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25 Feb 2015
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Bepp 250 - business & economic public policy - lecture 8: firm supply with perfect. Perfect competition is a market with many buyers and sellers of an identical product. For instance, grain, oil, food trucks, and desktop pcs all trade in perfect competition. In perfect competition, firms take the price as given. In perfect competition, the ceo"s problem is to find y to maximize profit given a set cost curve. The firm"s problem is to maximize profit taking prices p as given. P - c"(y) = 0 or mc = p here is optimal production for max profit. In the short run, the firm can produce zero but you cannot exit. In the long run, the firm can enter or exit. S can be calculated from mc & avc. If prices are lower than the minimum avc, then the firm will shut down (produce zero) Otherwise, the firm will produce at the mc curve.
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