Economics 1021A/B Chapter Notes - Chapter 12: Perfect Competition, Marginal Revenue, Demand Curve

• School: Western University
• Department: Economics
• Course: Economics 1021A/B
• Professor: Emilie Mc Hugh Rivers

Document Summary

Perfect competition is a market in which: 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. The minimum efficient scale of a firm is small relative to market demand, thus there is room in the market for many firms. Each firm produces identical goods or services. Price taker a firm that cannot influence the market price. Firms in perfect competition are price takers. Firm"s goal: to maximize economic profit (total revenue total cost) Total cost is the opportunity cost of production. Total revenue = (cid:1842)(cid:1870)(cid:1855)(cid:1857) (cid:1843)(cid:1873)(cid:1866)(cid:1872)(cid:1872) (cid:1845)(cid:1867)(cid:1864)(cid:1856) Marginal revenue is the change in total revenue that results from a one-unit increase in quantity sold; (cid:3042)(cid:3047) (cid:3019)(cid:3032)(cid:3049)(cid:3032)(cid:3041)(cid:3048)(cid:3032) The demand for a firm"s product is perfectly elastic because one firm"s sweater is a perfect substitute for the sweater of another firm.