NUTR 430 Chapter 14: EC120_ch14_firmsincompetitivemarkets.pdf
Document Summary
Competitive market a market in which there are many buyers and sellers so that each has a negligible impact on the market price. Three (3) characteristics: there are many buyers and sellers, the goods offered by the various sellers are largely the same, firms can freely enter or exit the market. A firm in a competitive market tries to maximize profit; total rev total cost. Average revenue = tr/q = p x q/q = p. How much revenue a firm receives for the typical unit sold. The change in total revenue from an additional unit sold. Mr > mc, then increase milk production. Mr < mc, then decrease milk production. Mr = mc, the firm is maximizing profits. The marginal-cost curve and the firm"s supply decision. Horizontal line at the market price the firm is a price taker. Price = average revenue = marginal revenue. If marginal revenue > marginal cost, the firm should increase its output.
