ECON 1B03 Lecture Notes - Lecture 7: Market Power, Perfect Competition, Marginal Revenue
![ECON 1B03 Full Course Notes](https://new-docs-thumbs.oneclass.com/doc_thumbnails/list_view/2152268-class-notes-ca-mcmaster-econ-1b03-lecture1.jpg)
46
ECON 1B03 Full Course Notes
Verified Note
46 documents
Document Summary
Perfect competition in the short run: choosing the profit maximizing quantity to produce. Recall: in a perfectly competitive market, market demand and market supply determine equilibrium price. Where everyone is a price taker, goods are identical, and firms can freely enter/exit the market. Recall: total revenue = p x q. tr is a linear function of q. When tc > tr there will be losses, when tc < tr there is profit. Average revenue (ar): how much revenue a firm receives for the typical unit sold. Marginal revenue (mr): the change in tr from an additional unit sold. (slope of tr function) (cid:2174)=(cid:2174)(cid:2173)=(cid:2172)(cid:2173)(cid:2173)=(cid:2172) (cid:2174)=(cid:2174)(cid:2173) If mr > mc you will be making a profit on that good, so firms should increase production ( q) If mr < mc you will not be making a profit, so firms should decrease production ( q)