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Chapter 7

Chapter 7 Summary (98% on the test)

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Louisiana State University
ECON 2000

Chapter 7 Summary 1 Firms vary in sizeinternal organization but they all take inputstransform them into outputs through a process called production2 In perfect competition NO single firm has any control over prices This follows from two consumptions 1 Perfectly competitive industries are composed of many firms each small relative to the size of the industry2 Each firm in a perfectly competitive industry produces homogeneous products3 The demand curve facing a competitive firm is perfectly elastic If a single firm P above the market price it will sell nothing Bc is can sell all it produces at the market price a firm has no incentive to reduce priceTHE BEHAVIOR OF PROFITMAXIMIZING FIRMS p1484 Profitmaximizing firms in all industries must make 3 choices1 how much output to supply2 how to produce that output3 how much of each input to demand5 ProfitTRTC total revenuetotal costsTC includes 1 outofpocket costs explicit costs or accounting costs
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