ECO100Y1 Lecture Notes - Marginal Cost, Market Power, Marginal Revenue

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taupecat784

10 Feb 2014

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Topic 8 perfect competition (week eight nov 1st - nov 10th) Outline: definition, total revenue, marginal revenue, and average revenue, profit maximizing output. - firm"s mc curve = firm"s ss curve (if p > avc); - shut down point: level of profits, entry and exit, short-run and long-run impact of a shift in demand, long-run market supply curve; - many buyers and sellers of identical product (so action of each buyer or seller exerts no impact on the market price); - freedom of entry and exit of firms (no barrier to entry/exit) - each firm is a price taker, meaning each firm faces an infinitely elastic demand curve at the market price; -- in the short run, the number of firms is fixed; In the long run, the number of firms can vary. Total revenue (the revenue of producing an additional unit of output) Dd/ss market demand/supply dd/ss individual firm"s demand/ market price supply.

Related Questions

Match the following.

constant-cost industry	A market structure in which a large number of firms sell a homogenous product or service with no restrictions on entry or exit and each firm is a price-taker.
increasing-cost industry	The demand facing a price-taking firm.
long-run equilibrium	A firm produces zero output but must still pay its fixed costs.
marginal revenue product	Price below which a firm shuts down in the short run.
perfect competition	All firms produce where price equals long-run marginal cost, and economic profits are zero.
perfectly elastic demand	Industry in which input prices rise as all firms in the industry expand output.
shut down	Industry in which input prices remain constant as all firms in the industry expand output.
the shut-down price	The additional revenue earned by hiring one more unit of a variable input.

viridianhare336

Your firm is one of 100 identical firms operating in the short run in a perfectly competitive market. Your total cost function (short run and long run) is C = 800 + 25 q + 0.5 q2, and your marginal cost function is MC = 25 + q. The (short run and long run) market demand curve is given by Q = 2,750 â 5P. a.Find the supply curve for your firm. Show work. Then, find the short-run market supply curve. Show work. b.Find equilibrium price, P*, and quantity, Q*, in the market in the short run.Show work. c.Find the lowest price at which your firm will not exit the market in the long run.Show work. Referring to your answer in part b, should your firm exit the market in the long run if P* in the market does not increase over time?Explain. d.If you choose not to exit, how many firms (including your own) do you expect to be in the market in the long run?Show work, and explain.

lavenderotter524

Your firm is one of 100 identical firms operating in the short-run in a perfectly competitive market. Your total cost function (short-run and long-run) is C = 500 + 20 q + q², and your marginal cost function is MC = 20 + 2q. The (short-run and long-run) market demand curve is given by Q = 4,500 - 5P.

a. Find the supply curve for your firm. Then, find the short-run market supply curve. Show work.

b. Find equilibrium price, P*, and quantity, Q*, in the market in the short-run. Show work.

c. Find your firm's total revenue, total cost, and profit in the short-run. Show work.

d. Find the minimum efficient scale (MES) for your firm. Show work. Find the long-run equilibrium price in the market after entry or exit has occurred. Show work.

aquamarinecrow33

ECO100Y1 Lecture Notes - Marginal Cost, Market Power, Marginal Revenue

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