Textbook Notes (369,067)
United States (206,185)
Economics (994)
Chapter 14

Chapter 14 - Firms in Competitive Markets

2 Pages

Course Code
Economics 10a
Gregory Mankiw

This preview shows 80% of the first page. Sign up to view the full 2 pages of the document.
Chapter 14: Firms in Competitive Markets  ­ market power if firm can influence market price of good What is a Competitive Market? ­ many buyers and sellers ­ identical goods ­ actions of single buyer or seller has negligible impact, price takers ­ firms can freely enter or exit market ­ average revenue: total revenue/amount of output  ▯equal to price for all firms ­ marginal revenue: change in total revenue from the sale of each additional unit  ▯ equal to price for competitive firms  Profit Maximization and the Competitive Firm’s Supply Curve ­ if marginal revenue > marginal cost, firm should increase output ­ if marginal cost > marginal revenue, firm should decrease output ­ at profit­maximizing level of output, marginal revenue = marginal cost ­ because competitive firm is price taker, marginal revenue = market price ­ for competitive firms, profit­maximizing quantity found by looking at intersection  of price with marginal­cost curve ­ shutdown: short­run decision not to produce anything during specific period of  time ­ exit: long­run decision to leave market ­ sunk cost: cost that has already been committed and cannot be recovered  ­ in short run, firm shuts down if TR 
More Less
Unlock Document

Only 80% of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.