ECON-1020 Study Guide - Midterm Guide: Monopolistic Competition, Marginal Revenue, Predatory Pricing
10 Mar 2016
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If consumers are maximizing saisfacion, they are consuming amounts where the marginal uility per dollar spent on each good and service is equal to that of every other good and service. Secondly, perfectly compeiive irms are producing levels of output where marginal costs are equal to price. Proit incenives are the encouragement to do so. Where prices are above average costs, a irm will be earning economic proits. Because perfectly compeiive irms always produce where long-term average cost is at a minimum, they will not have long-run economic proits (all irms will have the same accouning proits). It means that the irm will be producing a smaller quanity of output than the level of producion where average cost is at a minimum. What are the types of anitrust legislaion: price ixing: agreeing to ix prices and outputs (illegal), merger rules: mergers must be approved by the department of jusice and federal.
