ECO 1104 Chapter Notes - Chapter 14: Sunk Costs, Marginal Revenue, Average Variable Cost
3363410481 and 38221 others unlocked
16
ECO 1104 Full Course Notes
Verified Note
16 documents
Document Summary
Competitive market: each buyer and seller is small compared to the size of the market so has limited liability to influence the market, the product each firm sells is essentially identical. These two conditions mean that individual buyers and sellers have to market power no ability to influence the market price they are price takes. In addition, sellers can freely enter or exit the market in the long run. Total revenue: total revenue=price( p) quantity (q) Average revenue (ar): average revenue= total revenue. Marginal revenue: the change in tr from selling an additional unit. For all firms, average revenue equals the price of the good. For competitive firms, marginal revenue equals the price of the good. A competitive market can keep increasing its output without affecting the market price. So, each one-unit increase in q causes revenue to rise by p. It is only true for firms in competitive markets. Profit maximization and the competitive firm"s supply curve.