ECON 103 Study Guide - Final Guide: Deadweight Loss, Sunk Costs, Economic Surplus

• School: Simon Fraser University
• Department: Economics
• Course: ECON 103
• Professor: Douglas Allen

Document Summary

Competitive market means: all firms = price takers // flat demand curve (0 or demand, ignores rivals, no st(cid:396)ateg(cid:455) (cid:894)do(cid:374)"t t(cid:396)(cid:455) to t(cid:396)i(cid:272)k othe(cid:396)s(cid:895) Every firm = perfect substitute of each other. Remember: marginal revenue = , average revenue = The amount you can take away without halting production. At 9th shoe, 10th shoe will make us money so do it. At 10th shoes, price , so profit per shoe. Mc always intersects the average curves at their minimum. Breakeven point = minimum of ac where (profit = 0) Shutdown point = minimum of avc (rent = 0) Mc depends on price of inputs and production. In general, = mc shift . Lump sum tax = acts as fixed cost. Per-u(cid:374)it ta(cid:454) = avc (cid:894)(cid:271)(cid:455) u(cid:374)it of ta(cid:454)(cid:895) = ac & mc as a (cid:396)esult. Also includes opportunity & sunk cost. at eq. (prices adjust to eliminate any economic profit) Assume all firms = same and sunk cost .