ECON102 Chapter Notes - Chapter 12: Perfect Competition, Market Power, Marginal Revenue

• School: University of Waterloo
• Department: Economics
• Course: ECON102
• Professor: Maryann Vaughan

Document Summary

Perfect competition is a market in which: many firms sell identical products to many buyers, no restrictions to entry into the industry, established firms have no advantages over new ones, sellers and buyers and well informed about prices. With the market price of a sweater, the firm sells 9 sweater and makes total revenue of : part (b) shows the firm"s total revenue curve (tr) If the firm makes an economic loss, it must decide whether to exit the market or to stay in the market. If the firm decides to stay in the market, it must decide whether to produce something or the shut down temporarily: the decision will be the one that minimizes the firm"s loss. Loss comparisons: the firm"s loss equals total fixed cost (tfc) pluss total variable cost (tvc) minus total revenue (tr, economic loss = tfc + tvc tr, =tfc + (avc p) x q.