ECON 1050 Chapter Notes - Chapter 12: Variable Cost, Average Variable Cost, Fixed Cost

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Many firms sell identical products to many buyers. There are no restrictions on entry into the market. Established firms have no advantage over new ones. Sellers and buyers are well informed about prices. Examples of competitive industries: farming, photo finishing, plumbing, dry cleaning. Perfect competition arises if the minimum efficient scale of a single producer is small relative to the market demand for the good or service. Price taker firm that cannot influence the market price because its production is an insignificant part of the total market. Total revenue equals the price of its output multiplied by the number of units of output sold (price x quantity) Marginal revenue change in total revenue that results from a one-unit increase in. Calculated by dividing the change in total revenue by the change in the the quantity sold quantity sold. In perfect competition, the firm"s marginal revenue equals the market price.

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