ECON 1050 Chapter Notes - Chapter 12: Social Cost, Marginal Revenue, Demand Curve
8 Apr 2013
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Many firms sell identical products to many buyers there are no restirctions on entry into the market. Established firms have no advantage over new ones sellers and buyers are well informed about prices. Pc arises if the minimum efficient scale of a single producer is small relative to the market demand for the good or service. Minimum efficient scale is smallest output at which long-run average cost reaches its lowest level. In pc each firms produces a good that has no unique characteristcis, so consumers don"t care which firm"s good they buy. Price takers- a firm that cannot influence the market price because its production is an insignificant part of the total market. Firms goal is to maximize economic profit, which is equal to total revenue minus total cost. Total cost is opportunity cost of production, which includes normal profit. Total revenue equals price of its output multiplied by number of units of output sold (price x quantity)
