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micro summ.docx

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Department
Economics
Course
ECO1104
Professor
A L L
Semester
Fall

Description
Chapter 14 Firms in Competitive MarketsCharacteristics of Perfect Competition1Many buyers and many sellers2The goods offered for sale are largely the same3Firms can freely enter or exit the marketBecause of 12 each buyer and seller is a price takertakes the price as given1Total revenue TR MRPis only true for TRP x Qfirms in competitive markets ie each oneunit 2Average revenue AR increase in Q causes revenue to rise by P3Marginal Revenue MRThe change in TR from If MRMC then increase Q to raise profit selling one more unit If MRMC then reduce Q to raise profitRuleMRMC at the profitmaximizing QIf price rises to P then the profit2maximizing quantity rises to Q 2ShutdownA shortrun decision not to produce The MC curve determines the firms anything because of market conditionsQ at any priceIf firm shuts down temporarilyHence The MC curve is the firms revenue falls by T
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