ECON 110 Chapter Notes - Chapter 9: Average Variable Cost, Marginal Revenue, Perfect Competition

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28 Nov 2016
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ECON 110 Full Course Notes
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Competitive behaviour: competitive behaviour refers to the degree to which individual firms actively compete with one another for business. 9. 2 the theory of perfect competition: perfect competition is a market structure in which all firms are price takers, and there is freedom of entry into and exit from the industry. All the firms in the industry sell an identical product, homogenous product: 2. Consumers know the nature of the product being sold and the prices charged by the firms: 3. The level of each firm"s output as which its long-run average cost reaches a minimum is small relative to the industry"s total output, firm"s size is small relative to the size of the industry: 4. The industry is characterized by the freedom of entry and exist. 9. 3 short-run decisions: = tr - tc, assumption that the firm"s objective is to maximize profits. Existing firms must be maximizing their profits, given their existing capital, therefore mc = mr: 2.

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