ECON 1B03 Study Guide - Final Guide: Takers, Marginal Cost, Sunk Costs
14 Mar 2016
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ECON 1B03 Full Course Notes
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A perfectly competitive market has the following characteristics: Many buyers and many sellers who act independently. Firms can freely enter or exit the market. No barriers for entry such as patents etc. Recall : total revenue for a firm is the selling price times the quantity sold. Tr = pq: since (p)rice is given, the tr curve is a linear function of q. Tr (q)= p x q: average revenue, ar, tells us how much revenue a firm receives for the typical unit sold. Mr is the slope of the total revenue function: since tr = pq and p is given (because irms are price takers), if we increase q by 1 unit, tr will increase by the p of the good. Mr = p for a perfectly competitive irm. *this is true only for competitive irms that are price takers.
