ECON 20 Lecture Notes - Lecture 25: Perfect Competition, Marginal Cost, Production Function
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28 Aug 2020
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Perfectly competitive supply: the cost side of the market and production in the short- run. Perfectly competitive supply: the cost side of the market and production in the short run. The supply curve represents the marginal cost curve (includes opportunity costs) and the sellers reservation price in a market. This example [1] is based upon harry"s ability to collect/supply cans. As he spends more time collecting cans it becomes harder to find others which is why marginal cans diminished. Harry can sell each can for sh. 20 and his opportunity cost is /hour. He should continue collecting until marginal revenue = marginal cost (3 hours). He has diminishing marginal increases due to the principle of increasing opportunity costs (harder to find cans). The price of the good would have to increase for him to collect for more than 3 hours (he needs more than to continue collecting).
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