Economics 1021A/B Chapter Notes -Average Variable Cost, Marginal Revenue, Market Power

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Michael Parkin

Document Summary

Many firms sell identical products to many buyers. There are no restrictions on entry into the market. Established firms have no advantage over new ones. Sellers and buyers are well informed about prices. Farming, fishing, wood pulping and paper milling, plumbing, painting, and laundry services are all examples of highly competitive industries. Perfect competition arises if the minimum efficient scale of a single producer is small relative to the market demand for the good or service. Each firm produces a good that has no unique characteristics, so consumers don"t care which firms good they buy. A price taker is a firm that cannot influence the market price because its production is an insignificant part of the total market. Marginal revenue: marginal revenue is the change in total revenue that results from a one- unit increase in the quantity sold, the marginal revenue = demand (mr=d=ar=p)