ECON 2310 Lecture Notes - Lecture 9: Mira-Bhayandar Municipal Corporation, Marginal Revenue, Sunk Costs
13 Jan 2018
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Mr= change in r/change in q or r(q)-r(q-change in q)/change in q. Inverse demand function: describes how much the firm must change to sell any given quantity of its product. To earn the greatest possible profit, you need to choose the sales quantity that maximizes revenues-cost, where both revenue and cost depend on how much the firm decides to sell. Marginal revenue: captures the additional revenue it gets from the marginal units it sells (the smallest possible increment deltaq in sales quantity), measured on a per unit basis. 1) they sell deltaq additional units, each at price of p(q) (output. If this were the only effect, mr would = p(q). Ingramarinal units: the units the firm sells other than the deltaq marginal units. Price taker: when the firm can sell as much as it wants at some given price p, but nothing at a higher price. In this case, only the output expansion effect is present.
