ECON1101 Chapter Notes - Chapter 6: Marginal Product, Production Function, Marginal Cost
Chapter 6 -
The supply curve is for an entire market, it tells us how much all the firms in the market would
produce at each price. Producer surplus is a measure of how much a producer gains from
participating in the market.
Firm - an organisation that produces goods or services
Your firm as a price taker in a competitive market:!
A supply curve for a single firm tells us the quantity of a good that that firm will produce at different
prices.
Price taker - any firm takes the market price as given; this firm cannot affect the market price
because the market is competitive.
In a competitive market, any individual firm will be a price taker, this means that the firm cannot
influence the market price but instead has to decide how much to produce and sell at the given
market price of the goods.
A market in which a single firm cannot affect market prices is called a competitive market.
Competitive have to have at least several firms competing with one another. It is a competitive
market if no single firm can affect the market price, where instead each firm is a price taker.
Competitive market - a market in which no firm has the power to affect the market price of a good.
Other types of markets:
The opposite of a competitive market is a market that has only firm which is known as a monopoly.
In which seller dictates the price that the good sells for in the market.
The firms profits:
Profits - total revenues received from selling the product minus the total costs of producing the
product.
Profits = total revenues - total costs
Profits negative; total revenue less than total cost
Profits zero; total revenue = total cost (breaking even)
Profits positive; total revenue more than total cost
Profits depend on the quantity produced, based on total revenues and total costs.
Total revenue:
Total revenue - the price per unit times the quantity the firm sells
Total revenue = price x quantity
= P x Q
A firm can increase total revenue by pricing and selling more goods
Production and costs:
Total costs: the sum of all costs incurred in producing goods or services.
Document Summary
The supply curve is for an entire market, it tells us how much all the rms in the market would produce at each price. Producer surplus is a measure of how much a producer gains from participating in the market. Firm - an organisation that produces goods or services. Your rm as a price taker in a competitive market: A supply curve for a single rm tells us the quantity of a good that that rm will produce at different prices. Price taker - any rm takes the market price as given; this rm cannot affect the market price because the market is competitive. A market in which a single rm cannot affect market prices is called a competitive market. Competitive have to have at least several rms competing with one another. It is a competitive market if no single rm can affect the market price, where instead each rm is a price taker.
