ECON 1050 Chapter Notes - Chapter 12: Variable Cost, Demand Curve, Fixed Cost

• School: University of Guelph
• Department: Economics
• Course: ECON 1050
• Professor: Eveline Adomait

Document Summary

Perfect competition is a market in which : Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have no advantages over new ones. Sellers and buyers are well informed about prices. The goal of each firm is to maximize economic profit, which equals total revenue minus total. Total cost is the opportunity cost of production, which includes normal profit. A firm"s total revenue equals price, p, multiplied by quantity sold, q. (p x q) A firm"s marginal revenue is the change in total revenue that results from a one-unit increase in cost-effective the quantity sold. The firm"s minimum efficient scale is small relative to market demand, so there is room for many firms in the market. Each firm is perceived to produce a good or service that has no unique characteristics, so consumers don"t care which firms good they buy. In perfect competition, each firm is a price taker.