Management MGT 100 Lecture Notes - Lecture 4: Average Variable Cost, Sunk Costs, Variable Cost

• School: WUSTL
• Department: Management
• Course: Management MGT 100
• Professor: Kiousis Konstantina

Document Summary

A competitive market, sometimes called a perfectly competitive market, has two characteristics. The goods offered by the various sellers are largely the same. As a result, the actions of any single buyer or seller have a negligible impact on the market price. Price takers: must accept the price the market determines. Firms can freely enter or exit the market. Average revenue: total revenue divided by the amount of output. Tells us how much revenue a firm receives for the typical unit sold. For all firms, average revenue equals the price of the good. Marginal revenue: the change in total revenue from the sale of each additional unit of output. Marginal revenue equals the price of the good. Profit maximization and the competitive firm"s supply curve. As long as marginal revenue exceeds marginal cost, increasing the quantity produced raises profit. The marginal cost curve should cross the atc at the minimum. Price is horizontal because the firm is a price taker.