ECN 203 Chapter Notes - Chapter 6: The Incentive, Invisible Hand, Marginal Cost
Document Summary
Chapter 6. 0 representing the power of the invisible hand. 6. 1 the magic of the markets- product market efficiency under our nice assumptions. Perfect competition encourages constructive creativity by firms b/c it will reward those that are dynamic developers of ever greater efficiency. There is a conviction that the invisible hand of the market can guide nations to realize greater wealth. Perfect competition forces firms in product markets to choose the lowest ( most efficient) technique of production. The concept of average cost is needed for the analysis of the invisible hand. Average cost is used to represent a firms cost structure. Average cost is total cost of production divided by the total number produced. Average cost represent a measure of how much units cost if we spread the total cost out evenly for the given # produced. 6. 1. 3 marginal and average - the relationship between them. The margin moves moves faster than the average.
