ECO 1104 Chapter Notes - Chapter 14-15: Marginal Revenue, Marginal Cost, Demand Curve

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ECO 1104 Full Course Notes
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ECO 1104 Full Course Notes
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Competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. Characteristics: there are many buyers and many sellers in the market, the goods offered by the various sellers are largely the same, firms can freely enter or exit the market. Average revenue: total revenue divided by the quantity sold. Marginal revenue: the change in total revenue from an additional unit sold. If marginal revenue is greater than the marginal cost, the firm should increase its output. If marginal cost is greater than marginal revenue, the firm should decrease its output: at the profit maximizing level of output, marginal revenue and marginal cost are exactly equal. Marginal cost as the competitive firm"s supply curve. Since the firm"s marginal cost curve determines the quantity of the good the firm is willing to supply at any given price, it is the firm"s supply curve.

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